1 Tuesday, 16 April 2024 2 (10.00 am) 3 MR WARD: Good morning, sir, can you see and hear us? 4 SIR WYN WILLIAMS: Yes, thank you very much. 5 MS PRICE: May we please call Mr Miller. 6 DAVID WILLIAM MILLER (affirmed) 7 Questioned by MS PRICE 8 MS PRICE: Could you confirm your name please, Mr Miller? 9 A. David William Miller. 10 Q. Mr Miller, you have already given evidence in Phase 2 of 11 the Inquiry and attended the Inquiry for that purpose in 12 October 2022. Thank you for coming back to the Inquiry 13 to assist it in its work in Phases 5 and 6. As you 14 know, I will be asking questions on behalf of the 15 Inquiry. 16 You should have a hard copy of the second witness 17 statement provided by you to the Inquiry in a bundle in 18 front of you at the second tab. It is dated 28 February 19 this year; do you have that? 20 A. I do. 21 Q. If you could turn to page 16 of that, please. Do you 22 have a copy with a visible signature? 23 A. I do. 24 Q. Is that your signature? 25 A. It is. 1 1 Q. I understand that you have a correction you wish to make 2 to the statement in light of recent disclosure; would 3 you like to tell us what that correction is? 4 A. Yes, in paragraph 51, I make a statement about the 5 IMPACT Programme and disclosure this week has reminded 6 me that I was, in fact, on that Board. So I was on the 7 IMPACT Board. 8 Q. With that correction made, are the contents of that 9 statement true to the best of your knowledge and belief? 10 A. Yes. 11 Q. For the purposes of the transcript, the reference for 12 Mr Miller's second statement is WITN03470200 and, for 13 completeness, the reference for Mr Miller's first 14 statement provided for Phase 2, which already appears on 15 the Inquiry's website, is WITN03470100. 16 My questions today, Mr Miller, will focus on the 17 matters covered in your second statement relating to 18 Phases 5 and 6, although I may refer back to your 19 Phase 2 evidence where it is relevant to those Phases 5 20 and 6 issues. 21 Starting, please, with the roles you have held with 22 the Post Office, you helped with this when you gave 23 evidence in Phase 2 but, given that it was some time 24 ago, I hope you'll forgive me for going over this ground 25 again in brief. You joined the Post Office in 1970; is 2 1 that right? 2 A. Correct. 3 Q. You moved to Post Office Counters Limited in 1983? 4 A. Correct. 5 Q. In 1995, you joined the Horizon project -- 6 A. Correct. 7 Q. -- and that was as a Deputy Director at that stage. You 8 were appointed Horizon Programme Director in 1998; is 9 that right? 10 A. Correct. 11 Q. In Phase 2 it was your evidence that you had delivered 12 a nationwide project for the Post Office a few years 13 before but that you did not have a technical background; 14 is that right? 15 A. That is right. 16 Q. You say in your second statement at paragraph 3 that you 17 left the Horizon Programme Director role at the turn of 18 the year 1999. By that, do you mean 1999 into 2000? 19 A. I do. 20 Q. Your oral evidence in Phase 2 was that you left the role 21 in early 2000 and it may be that a document we're going 22 to look at later this morning will assist with the 23 timings of that. You went from the Horizon Programme 24 Director role into the role of Managing Director of Post 25 Office Network; is that right? 3 1 A. That's correct. 2 Q. A position you held until July 2001? 3 A. Correct. 4 Q. Your responsibilities in this role included you having 5 responsibility for the Operations Directorate and the 6 Automation Directorate; is that right? 7 A. There was some others as well but, yes, those two, 8 certainly. 9 Q. Is it right that Post Office Security and Investigation 10 Operations fell under the Operations Directorate? 11 A. Yes, at that stage, for the 18 months they did, yes. 12 Q. Is it right that the Horizon system, among other 13 systems, fell under the Automation Directorate? 14 A. That's correct. 15 Q. Who was it who reported to you on Post Office Security 16 and Investigations Operations when you were Managing 17 Director of Post Office Network? 18 A. I think it was Alan Barrie, as Operations Director, 19 though I'm not absolutely sure. 20 Q. Who was it who reported to you on any issues relating to 21 the Horizon system when you were Managing Director of 22 Post Office Network? 23 A. David X Smith, if I can put it like that. 24 Q. The IT David Smith? 25 A. The IT David Smith. 4 1 Q. Did you report to Stuart Sweetman in this role? 2 A. I did. 3 Q. Is it right that you did not sit on the board as 4 Managing Director of Post Office Network? 5 A. That's quite right. 6 Q. Although you held the role for 18 months, you say in 7 your statement that you were on sick leave for the last 8 six months of that time? 9 A. That's true. 10 Q. At paragraph 10 of your second statement you say that 11 you returned to work in August 2001? 12 A. That's correct. 13 Q. At this point, is that when you became Operations 14 Director of the newly reconstituted Post Office Limited? 15 A. That's correct. 16 Q. In this role, you initially reported to the Managing 17 Director of Post Office Limited; is that right? 18 A. I think I reported to Stuart Sweetman. 19 Q. In the Operations Director role? 20 A. When -- yes, and then I think Stuart Sweetman left and 21 Paul Rich took over temporarily as Managing Director of 22 Post Office Limited before David Mills arrived. 23 Q. David Mills arrived as Chief Executive in early 2002; is 24 that right? 25 A. That's correct. 5 1 Q. After which point you reported to him? 2 A. I did. 3 Q. You say in your statement that, when you were Operations 4 Director, you were responsible for the Retail Line, 5 including subpostmaster relations and for cash 6 distribution; is that right? 7 A. That's correct. 8 Q. But you also had a role helping David Mills to 9 understand the business and assisting in recruiting new 10 directors as required? 11 A. Yes. 12 Q. As Operations Director, you sat on the Board, the Post 13 Office Limited Board; is that right? 14 A. That's correct. 15 Q. So you were an executive member of the Board from the 16 point of taking up this role in 2001. Just to pin down 17 the point at which you became a member of the Board, you 18 say in your second statement at paragraph 8 that you 19 were a member of the Board from November 2001. There 20 appears to be a gap between you taking up the Operations 21 Director role in August 2001 and that point; is that 22 right? 23 A. Yes, there is. 24 Q. Why was that? 25 A. I'm not sure, but the -- it may be to do with the 6 1 precise setting up of the date of Post Office Limited, 2 when it was reconstituted. 3 Q. You say in your second statement at paragraph 11 that, 4 as the scope of the changes needed became apparent, 5 David Mills changed your job title to Chief Operating 6 Officer. Are you referring here to changes needed to 7 the business -- 8 A. I am. 9 Q. -- to Post Office Limited? You say in that paragraph 10 that you thought that this happened in about 2004. 11 I would just like to look at some Board minutes, please, 12 from 2002, which were sent to you for the purposes of 13 preparing your second statement, which might assist with 14 dating this change in role to the Chief Operating 15 Officer. Could we have on screen, please, POL00021479. 16 These are the minutes of a meeting of the Post 17 Office Limited Board on 24 May 2002. We can see David 18 Mills in attendance as Chief Executive and then two 19 people down we have your name and title, Operations 20 Director, David Miller. So, at this point, it appears 21 that your title was still Operations Director; would you 22 agree? 23 A. Yes, indeed. 24 Q. Could we have on screen, please, POL00021480. These are 25 the minutes of the Post Office Limited Board meeting 7 1 which took place later the same year on 26 September 2 2002. Looking about halfway down the page, we see your 3 name next to "Apologies" -- a little further down, 4 please -- David Miller, and your role described as Chief 5 Operating Officer. It appears from this that you held 6 the role of Chief Operating Officer by September 2002 7 rather than 2004 -- 8 A. Yes, I would -- 9 Q. -- would you agree with that? 10 A. -- I would go with the minutes, obviously. 11 Q. On the face of these minutes, there is no person listed 12 as being Operations Director. Was someone else given 13 the role of Operations Director when you became Chief 14 Operating Officer or was the role subsumed by the Chief 15 Operating Officer -- 16 A. The role was subsumed. 17 Q. The Board minutes the Inquiry has seen suggests that, by 18 February 2005, Ric Francis had been appointed as 19 Operations Director and was attending Board meetings as 20 well as you as Chief Operating Officer. Can you help 21 with the circumstances of Ric Francis' appointment and 22 the remit of his role? 23 A. Yes, Ric Francis was recruited to run IT, so he was IT 24 Director. But as David Mills reviewed responsibilities, 25 he felt that it would be beneficial if Ric took on some 8 1 of my operations responsibilities, particularly cash, 2 and, therefore, my role was changed a little bit in 3 order to accommodate that. 4 Q. You say in your second witness statement at paragraph 11 5 that the Chief Operating Officer role focused on some of 6 the major changes needed to stay solvent. Is that for 7 Post Office Limited to stay solvent? 8 A. Yes, that's true. 9 Q. What was the financial position of Post Office Limited 10 when you became Chief Operating Officer? 11 A. We were running at a loss and we were trying to put 12 ourselves in a position where we didn't run at a loss. 13 The complicating factor was that to run the rural 14 network needed a subsidy from Government and there was 15 a lot of work on what size the rural network ought to be 16 and how much money we would therefore require from the 17 Government to run it. 18 Q. What was your brief from David Mills as to the priority 19 to be given to improving the financial position of Post 20 Office Limited? 21 A. My first priority was to do a project which was called 22 Network Reinvention, which was, in fact, closing -- 23 originally 3,000, I think, in the end, it was 2,500 of 24 the non-rural post offices. The Government had supplied 25 a sum of money, 150 million, voted through Parliament, 9 1 to compensate subpostmasters and it was a question of 2 working out where the people were who wanted to go, 3 where we needed post offices and trying to make a best 4 match of the two. 5 Q. You say that the Chief Operating Officer role focused on 6 these major changes in relation to staying solvent. 7 Were you briefed by Mr Mills on any other priorities for 8 you as Chief Operating Officer when you took up the 9 role? 10 A. No, he focused very heavily on the need to get the 11 company into a solvent position. 12 Q. So that was the overriding priority at that time? 13 A. Yes, it was. 14 Q. You say in your statement that you reported to David 15 Mills until he left the organisation in late 2005; is 16 that right? 17 A. That's correct. 18 Q. When he left, you became temporary Managing Director of 19 Post Office Limited for a two to three-month period, 20 until Alan Cook arrived as David Mills' replacement? 21 A. Yes, it was until Alan Cook arrived, whatever that 22 period was. 23 Q. You then reported to Alan Cook until you retired on 24 28 July 2006; is that right? 25 A. Correct. 10 1 Q. Presumably reporting to Alan Cook as Chief Operating 2 Officer once again? 3 A. Correct. 4 Q. Before we come on to the detail of your involvement in 5 the issues being explored in the current phases of the 6 Inquiry, I'd like to address, please, the question of 7 your understanding of your duties as an Executive 8 Director on the Board. When you were appointed as 9 a Board member, were you provided with any induction or 10 training covering the nature of your duties as 11 an executive member of the Board? 12 A. Yes, we did a day session with our solicitors, Slaughter 13 & May, but that focused very heavily on the issues 14 regarding company profit and loss and on our duties as 15 Board members, if we felt the company was not going to 16 be able to pay its creditors in the future. 17 Q. What was your understanding of the Board's 18 accountability for the oversight of operational 19 performance? 20 A. That we were responsible for that. 21 Q. What did you understand your accountabilities to the 22 Chief Executive Officer to be when you were Operations 23 Director and then Chief Operating Officer? 24 A. I was responsible for the areas that I had been 25 allocated, for -- I was responsible for whatever targets 11 1 were agreed between me and the Chief Executive and I was 2 responsible for -- no, I think that's it. Sorry. 3 Q. Would you agree that the identification analysis and 4 management of risk is central to running a company? 5 A. I would. 6 Q. Do you agree that it is a vital area of board oversight 7 and of fundamental importance? 8 A. Yes. 9 Q. Do you agree that identifying, analysing and managing 10 risk was a fundamental part of your executive 11 responsibilities? 12 A. Yes. 13 Q. Would you accept that, in order to discharge your 14 responsibilities in relation to risk, both as 15 an executive and a Board member, you needed to be 16 proactive and curious about possible risk areas? 17 A. Yes. 18 Q. Where you identified a risk when carrying out your 19 executive role, what were the mechanisms in place for 20 you to raise that risk, first with the CEO and, second, 21 with the board? 22 A. I had one-to-ones with the CEO, and I would expect risks 23 that I identified to be raised there. But that we -- 24 the Board had a risk register and there was a process by 25 which actually anybody in the company, certainly Board 12 1 members, could put items on the risk register. These 2 would then be assessed by Finance and then they would 3 appear on a regular basis on the risk register as a risk 4 defined and what mitigation action was required. 5 Q. Do you consider that the culture at the Post Office was 6 supportive of executives reporting concerns about risk 7 to the CEO and to the Board? 8 A. Yes. 9 Q. Why do you say that? 10 A. Just that it wasn't just the CEO, it was Sir Mike, who 11 the Inquiry has seen, set up a Risk Committee and he was 12 keen that we should be looking across the areas, and 13 identifying risk, as well as David Mills. So it wasn't 14 just at CEO level, it was at Chairman level as well. 15 SIR WYN WILLIAMS: Ms Price, there's still a document on my 16 screen, can that come down? 17 MS PRICE: Apologies, sir. That can come down. Thank you. 18 When you were in directorship roles, was your 19 remuneration fixed or performance based? 20 A. Largely fixed but there was a performance element in it. 21 Q. How was your performance measured? 22 A. There would be targets agreed at the beginning of 23 a financial year and then those targets would be 24 reviewed with the Chief Executive at one-to-ones 25 throughout the year and, at the end of the year, 13 1 conclusions would be made as to whether targets had been 2 met or not. 3 Q. Targets for what? 4 A. Costs of running the business. Some targets for 5 feedback from staff on what they felt about the 6 business. I'm sorry, time is not helping me here but 7 there were a number, is all I will say. Oh, I'm sorry, 8 things like quality of service, in terms of -- 9 particularly at direct office counters -- it was 10 an issue that was fairly big. 11 Q. Did you receive bonus payments whilst you were in any of 12 your director roles? 13 A. I did. 14 Q. How was the level of bonus payment determined? 15 A. That was done -- I think there was a Remuneration 16 Committee but that seemed to be taken -- decisions on 17 that seems to be taken outside the main Board. 18 Q. I'd like to turn, please, to the knowledge of the 19 Horizon system issues in the run-up to Legacy Horizon 20 rollout, gained from your time as Horizon Programme 21 Director which you brought to your subsequent roles. 22 I don't intend to go back over your Phase 2 evidence in 23 any detail but I would like to draw together some key 24 points, which I will take one at a time. If, at any 25 point, you want to look at the transcript of your oral 14 1 evidence, we can bring that up on the screen to assist 2 you. Just say if you'd like me to do that. 3 First, you told the Chair you were aware of issues 4 with the cash accounts in March 1999, arising from the 5 end-to-end testing which had been done. In particular, 6 there had been incorrect cash account mapping which 7 would have caused misbalancing cash accounts in all 8 offices, had the system been in operation. This 9 resulted in an entry on a Known Problem Register, and 10 your position in Phase 2 was that this was an issue 11 which was being dealt with. Is that a fair summary of 12 your evidence on the March 1999 end-to-end testing 13 reports? 14 A. That is. 15 Q. Second, after the live trial of the Horizon system in 16 May 1999, you were made aware that subpostmasters were 17 having serious problems with the software, especially 18 the balance, and this was explained to you at an NFSP 19 meeting, attended by you on 11 June 1999, and at 20 a meeting at around the same time, attended by a large 21 number of subpostmasters in the Northeast. Again, is 22 that a fair summary of your evidence on your awareness 23 of issues being experienced by subpostmasters trialling 24 the system? 25 A. Yes. 15 1 Q. Third, you were asked about the minutes of a Board 2 meeting which had taken place in July 1999 and which you 3 attended. The minutes recorded an assessment attributed 4 to you that the Horizon system was robust and fit for 5 purpose. You were asked about this by both Counsel to 6 the Inquiry and by Mr Moloney on behalf of the clients 7 he represents. Is it fair to summarise your evidence on 8 this point in this way: you would not have told the 9 Board that the Horizon system was robust and fit for 10 purpose because, at that time, it was not either of 11 those things? 12 A. That I would not have done it? 13 Q. Your evidence -- and we can go to your responses to both 14 Counsel to the Inquiry and to Mr Moloney but your 15 evidence was that it was not correct that Horizon was 16 robust and fit for purpose? 17 A. No, that -- I remember that exchange from Mr Moloney, 18 and I should not have said that it was robust. 19 Q. What is your position, then, on whether you did say 20 that? 21 A. I can't remember the Board meeting but I make the 22 assumption that the Board minutes are correct. So I did 23 say it. 24 SIR WYN WILLIAMS: Sorry, Mr Miller, I want to be clear 25 about this. You don't actually remember what you said, 16 1 you are prepared to assume that the Board minutes are 2 correct and, if they were correct, you should not have 3 said what is recorded; is that it? 4 A. I'm afraid so, sir, yes. 5 SIR WYN WILLIAMS: Fine, thank you. 6 MS PRICE: Fourth, in August 1999, there were ongoing 7 concerns about transactions being completely and 8 accurately recorded, in particular those raised by 9 Acceptance Incident 376, which had not been resolved by 10 the time you left the Horizon Programme Director role. 11 Is that a fair summary on that point? 12 A. Yes. 13 Q. There are just two documents I would like to go to from 14 the final months before you left the Horizon Programme 15 Director role, given their importance. Could we have on 16 screen, please, POL00090839. Going to the second page 17 of that document, please, this is a letter to you dated 18 23 August 1999 from Ernst & Young and, scrolling down 19 a little, please, we see here: 20 "Dear Mr Miller 21 "Horizon Acceptance Testing 22 "As auditors of the Post Office we have been asked 23 by Post Office Counters Limited to provide you with our 24 views in respect of certain accounting integrity issues 25 arising from tests performed by POCL on Horizon data in 17 1 the live trial. 2 "We have not performed any validation of the issues 3 or testing of the data. Our views expressed in this 4 letter are based on information provided to us by [Post 5 Office Counters Limited] resulting from their tests. 6 This letter is not intended to provide any assurance 7 over any data in the live trial or over any results 8 arising from tests of such data. 9 "The live trial is limited to 323 outlets." 10 The next paragraph: 11 "The following issue, as described to us by [Post 12 Office Counters Limited] gives us concern as to the 13 ability of [Post Office Counters Limited] to produce 14 statutory accounts to a suitable degree of integrity. 15 We understand that [Post Office Counters Limited] has 16 attributed a severity rating of 'High' to this matter." 17 There is then reference to incident 376, that's 18 Acceptance Incident 376, and a reference to data 19 integrity and the last sentence there: 20 "At present this control test is showing 21 discrepancies in that certain transactions do not record 22 the full set-off attributes and this results in the 23 whole transaction being lost from the daily polling. 24 "We are also informed that an incident has also 25 occurred where transactional data committed at the 18 1 counter has been lost by the Pathway system during the 2 create of the outlet cash account and has not therefore 3 been passed to TIP in the weekly cash account subfiles. 4 "Both types of incident result in a lack of 5 integrity on each of the two data streams used by [Post 6 Office Counters Limited] to populate its central 7 accounting systems. We understand that the cash account 8 data stream is the primary feed for [Post Office 9 Counters Limited's] main ledgers and client 10 reconciliation processes." 11 Just going over the page, please. We see the second 12 paragraph there: 13 "It is fundamental to any accounting system that it 14 provides a complete and accurate record of all 15 transactions. These discrepancies suggest that the ICL 16 Pathway system is currently not supporting this 17 fundamental." 18 On the first page of this letter, please, going back 19 to that first page -- and scrolling up -- there is some 20 handwritten annotations from someone with the initials 21 "DWN"; is that you? 22 A. That is. 23 Q. You say this: 24 "Please ensure that these issues are fully addressed 25 during the remaining acceptance process. Keep me in 19 1 touch." 2 1 and 2: 2 appears to be Keith Baines and can you 3 help with who the first recipient of your comments is? 4 A. That's right. 5 Q. Sorry, who is the first recipient there? 6 A. Bruce Macniven, I'm sorry, and he was a Deputy Director 7 of the programme. 8 Q. You accepted in Phase 2 that this assessment by Ernst & 9 Young and the potential implications for the company 10 accounts was very serious indeed. 11 A. Yes, can I -- could I just say, though, that we -- 12 Stuart Sweetman and I, Stuart Sweetman was my boss and 13 on the board of Post Office. At the time, he was the 14 sponsor of the project. We discussed what our 15 relationship ought to be with the auditors when we ought 16 to start informing auditors about what we were doing, 17 and this was part of the process to get Ernst & Young, 18 who are our auditors, onside and understanding what we 19 were doing, so that when they came to audit things, they 20 would have had forewarning. 21 Q. One of the last documents that you were taken to by 22 Counsel to the Inquiry during his questioning in Phase 2 23 was a document termed "The Third Supplemental 24 Agreement", a document which you said at the time you 25 remembered. Could we have that on screen, please. The 20 1 reference is FUJ00118186. The date of this document is 2 19 January 2000, which is after, I think, you say you 3 left the Horizon Programme Director role but, if we go 4 to the last page, please, that's page 36, we can see 5 that the agreement was signed by you on behalf of Post 6 Office Counters Limited witnessed by Keith Baines. Can 7 you help with what role you were in when you signed the 8 document? 9 A. Yes, I was still Horizon Programme Director and I was 10 running that concurrently with setting up a new business 11 unit as the Managing Director of Post Office Network. 12 Q. How long were you running those two roles concurrently? 13 A. Until David Smith was appointed as the Automation 14 Director. 15 Q. You accepted, when giving your Phase 2 evidence, that 16 this agreement acknowledged that it was not always 17 possible to get to the root cause of an imbalance or to 18 make the appropriate correction; do you recall that? 19 A. I don't but I will accept it. 20 Q. Could we have on screen, please, Mr Miller's second 21 statement again, the reference is WITN03470200, and it's 22 the second page of that, please. You deal at 23 paragraph 4 here with your view of things at the point 24 you left as Horizon Programme Director. You say at 25 paragraph 4: 21 1 "At this stage my view of Horizon was that it was 2 a new, very large and complex system which was under 3 constant review and improvement by Fujitsu. I never 4 considered Legacy Horizon perfect but thought that any 5 problems with the system were subject to control 6 procedures leading to resolution." 7 Then going, please, to paragraph 7. Over the page, 8 please: 9 "After stepping down as Horizon Programme Director 10 I did not brief anyone from the POL or RMG Boards, 11 Investigation Teams, Legal Teams or any other person 12 responsible for the conduct of prosecutions or civil 13 proceedings because (1) I thought that any problems with 14 the system were subject to control procedures leading to 15 resolution and (2) I was unaware of the full extent of 16 the Horizon issues until I had read the judgments I have 17 referred to". 18 Those are the judgments you referred to on the 19 previous page of Hamilton & Others v the Post Office. 20 Can you help, please, with what you mean by "control 21 procedures leading to resolution"? 22 A. That there was a process in place of reporting errors or 23 problems that had helplines on both the Post Office side 24 and particularly on Fujitsu and that they were 25 processing as time went on. As things arose, they would 22 1 be put into the system, processed, resolved. That was 2 my view of what was going to happen. 3 Q. So you're not saying here that, when you left the 4 programme, you thought there was a complete fix in the 5 pipeline to eradicate cash account inaccuracies; you 6 were saying that you understood that, when these 7 occurred going forwards, there would be procedures in 8 place to resolve them; is that right? 9 A. Yes. 10 Q. What was the basis for this understanding? 11 A. Well, the basis was understanding what helplines had 12 been set up and what the procedures were. 13 Q. When you say at paragraph 20 of your second statement 14 that you believed that issues were being addressed going 15 forwards, is this another reference to your 16 understanding there would be control procedures in 17 place? 18 A. It is, yes. 19 Q. That document can come down now. Thank you. 20 In Phase 2, the Inquiry heard evidence from Tony 21 Oppenheim, the Finance and Commercial Director of ICL 22 Pathway, to the effect that the Third Supplemental 23 Agreement and the subsequent operational processes 24 acknowledged that there would be occasional mismatches, 25 given the scale of the system. His assumption was that 23 1 the Post Office would look at these and, certainly at 2 the outset, give postmasters the benefit of the doubt. 3 He said that ICL Pathway needed feedback when these 4 things occurred in order to find errors in the system 5 and to fix them. 6 Were you aware that ICL Pathway's understanding was 7 that, where mismatches arose, Post Office would look 8 into these and, certainly at the outset, give 9 postmasters the benefit of the doubt? 10 A. No. 11 Q. Could we have on screen, please, FUJ00098040. This 12 a PowerPoint presentation produced by David Smith, 13 that's IT David Smith. It provides a history of Horizon 14 and Horizon Online. The date, on its face, is September 15 2010, some years after you retired, so you would not 16 have seen this at the time. There are two parts of it, 17 however, that refer to your involvement in Horizon 18 issues so I'd like to take you to those. Starting, 19 please, with page 21 of this document, this slide deals 20 with Post Office Counters Limited's views on the 21 agreement reached with ICL Pathway. It reads: 22 "The leaders at POCL felt they had been shafted by 23 a Government/Pathway stitch up 24 "Whilst the Group Board signed up to the deal 25 (Sunday afternoon in the CEO's kitchen!) 24 1 "They did so with a gun pointed at their head -- 2 'sign this or all the other things you want you can 3 forget' 4 "Policy felt stuffed by Pathway with terms that were 5 imposed 6 "Dave Miller, the MD of Post Office Network, said at 7 the time 'I have the same feelings about Pathway as 8 I would have for the man who had just shoved 15 inches 9 of bayonet up my posterior' 10 "No statement could more adequately express the 11 attitude of Post Office towards Pathway"? 12 Do you recall making the comment which is in quote 13 marks there? 14 A. Absolutely not. 15 Q. Are you saying that you didn't make that comment? 16 A. I didn't make that comment. 17 Q. Does the sense of feeling described in relation to the 18 Post Office's feelings towards Pathway accord with your 19 recollection? 20 A. The -- all the circumstances around the departure of the 21 Benefits Agency and the deal that the Government had to 22 do -- felt it had to do -- and pressure that was put on 23 the Post Office were partly known to people at my level. 24 But I think we felt, as a company, that we needed to 25 carry on with the project and we needed to work with 25 1 Pathway/ICL/Fujitsu, and the sort of negativity about 2 it, I think there was a certain amount of resentment, 3 perhaps understandably but, I mean, those words, a lot 4 of that, is entirely unprofessional. 5 What we were trying to do was to make the thing 6 work, to get it rolled out, to get Horizon in for the 7 whole company, including subpostmasters, ironically. 8 Q. Moving, please, to page 32 of this document. This slide 9 covers the pilot and the rollout. Then, over the page, 10 please, we have this: 11 "In parallel Dave Miller, PON MD and Mike Stares who 12 headed up Pathway at this time resolved to improve the 13 relationship ..." 14 There are number of things listed there: 15 "Series of workshops with a facilitator to build 16 better relationships between the parties 17 "The success of the rollout and the development of 18 CSR+ helped to create more trust between the parties 19 "However the relationship was still crusty 20 "Post Office wanted its pound of flesh to make 21 Pathway hit SLAs for which there was no business impact 22 if they were missed 23 "But which gave POL the right to terminate if they 24 were not met within a given time frame." 25 Just looking at of the content of this slide, does 26 1 this reflect you having some continuing involvement in 2 the Horizon Programme when you were Managing Director of 3 Post Office Network? 4 A. Yes, in the sense that we -- I wanted us to work with 5 Pathway in a constructive way to get things done, and so 6 that would be true. But this document that I have been 7 shown before, it had no official position with regard to 8 anything that was done by Post Office Network. This was 9 written by somebody in 2010. So I'm -- there are some 10 elements of truth in this document, but there's an awful 11 lot of writing it up for the purpose of, if you like, 12 the ego of the person who wrote the document. 13 Q. Could we have on screen, please, WITN05970123. This is 14 a document authored by Jeremy Folkes and is dated 15 February 2000. It's title is "BA/[Post Office Counters 16 Limited] and Horizon, A Reflection on the past 17 five years: Lessons, Issues and Key Points". 18 Going to page 2, please, the introduction explains 19 the purpose of the document. 20 "During the last five years of the various 21 incarnations of the BA/POCL and the Horizon programmes, 22 there has been a considerable turnover of staff within 23 the POCL team, leading at times to a lack of continuity 24 and certainly a loss of key knowledge and accumulated 25 wisdom." 27 1 In the next paragraph: 2 "This document is intended to help mitigate the 3 effect of the loss of a further batch of staff. It 4 evolved from the concept of producing a general 5 'brain-dump' document, in addition to more usual format 6 handover for work-in-progress and the like. 7 "This document has been produced for Dave Miller, 8 the Managing Director of Post Office Network Unit, the 9 business unit which owns Horizon on behalf of the Post 10 Office." 11 Do you recall receiving this document at the time it 12 was produced for you? 13 A. I recall asking him to do it. 14 Q. Section C of this document covers future risk areas. 15 Going to page 21, please, Section C6 is titled "Some 16 technical capability still to be proven", and the 17 introduction to this section says this: 18 "This section outlines a number of technical areas 19 which it would be wise to 'watch', although they are not 20 the subject of any outstanding Acceptance Incidents. 21 They should not be taken as predictions of which are yet 22 to go wrong, more as a list of possible areas of 23 weakness which could 'trip us up' in the future, 24 especially as the number of offices increases at the 25 planned rollout rate up to the target full population. 28 1 "There is an argument, based on the same principles 2 as used to justify, albeit not to great effect, the need 3 for assurance during development, that states the need 4 for ongoing assurance during the live operation of the 5 service and associated system. We do not appear to have 6 any contractual basis to seek such involvement, however 7 we may wish to negotiate with Pathway at the relevant 8 time to seek some confidence that these issues are 9 indeed under control." 10 Then a number of issues are raised. At C6.2 there 11 is the effect of slow replication, the last paragraph on 12 this page reading as follows: 13 "However, as a result of the proper handling of slow 14 replication -- ie the effect should be benign -- these 15 delays these scenarios can go unnoticed (and therefore 16 unfixed, if there is some underlying problem) for 17 a period of time." 18 Other issues flagged -- going over the page, 19 please -- were communication failures, integrity during 20 failure conditions, scalability, performance over time, 21 and system management. Can you help with what you did 22 with this document and any steps which were taken based 23 on the content of it? 24 A. I, as far as I'm aware, I would have given it to David 25 Smith, who was Director of Automation. What I would 29 1 have done, like to have done, would have been to 2 organise a meeting in the company with Jeremy. Jeremy 3 was about to leave, by the way, which is why I asked and 4 I thought he had all these years of experience and we 5 ought to understand. Unfortunately, the changes that 6 were taking place meant that, as far as I am aware, that 7 meeting didn't happen. So this was, if you like, put 8 into our company archive and I suspect that some of the 9 good stuff that is in here was not picked up. 10 Q. Could we have on screen, please, Mr Miller's second 11 statement, paragraph 5, please, which is page 2. You 12 say here: 13 "I did not have any involvement with/oversight of 14 such issues ..." 15 This follows on from your discussion of issues with 16 Legacy Horizon when you were Horizon Programme Director. 17 You say: 18 "I did not have any involvement with/oversight of 19 such issues after I stepped down programme director." 20 Just thinking of the documents we've just been to, 21 does this remain your evidence, notwithstanding the work 22 you asked Jeremy Folkes to do and the slide contents 23 that we looked at, or do you consider that work 24 different in character? 25 A. The two things that you have just quoted to me, I would 30 1 consider that were different in character. I would have 2 liked to have taken a lot more notice of what Jeremy 3 said and I had that, as it were, on hand early on. The 4 other thing that you showed me, I had not become aware 5 of until relatively recently, and that was done in 2010. 6 So I distinguish between the two. 7 Q. Turning then, please, to criminal investigations and 8 prosecutions. When did you first become aware that the 9 Post Office criminally investigated and prosecuted 10 postmasters for criminal offences arising from alleged 11 shortfalls in branch accounts? 12 A. I became aware of what the Post Office did in terms of 13 prosecutions in 1970, when I joined the company, and we 14 had a session with the security part of the company, the 15 Post Office Investigation Division, for management 16 trainees, and they made it very clear that that was 17 something the company did. They were talking primarily 18 then, because I was in Royal Mail, about Royal Mail but 19 they did say that this applied to subpostmasters. 20 Q. After the rollout of Horizon, the branch accounts were 21 generated by the Horizon system; that's right, isn't it? 22 A. Yes. 23 Q. Apparent shortfalls were identified on the basis of 24 a mismatch between, for example, what the Horizon 25 printout said should be in the till and what was 31 1 actually in the till? 2 A. Yes. 3 Q. Would you agree with that? 4 So does it follow that once you were involved in the 5 Horizon rollout, you were aware that prosecutions were 6 being pursued using data generated by the Horizon IT 7 System? 8 A. I wish it had been as crystal clear to me as that, but 9 I think I have to say that I would have been aware, yes. 10 Q. Who did you understand was carrying out investigations 11 which led to those prosecutions? 12 A. Post Office Investigators. 13 Q. Who did you think was responsible for the decision of 14 whether to prosecute? 15 A. Some -- sorry, some of this is what I have learnt 16 through my attention to this Inquiry. But there was 17 a mix between our lawyers and the Post Office 18 Investigation Division, in terms of who would decide 19 about prosecutions. 20 Q. Did you know that at the time, that it was a mix between 21 the lawyers and the Investigation Team? 22 A. When I say a mix, I think this varied over time. From 23 what I've heard, I think this varied over time, with 24 some -- sometimes the lawyers being in charge, sometimes 25 the Investigators being in charge, and I probably wasn't 32 1 as aware of that position at the point in time you are 2 talking about. 3 Q. What did you understand the role of Royal Mail Group's 4 Criminal Law Team to be in relation to prosecutions? 5 A. They were -- as far as I was concerned, they were the 6 Criminal Law Team of the company. Post Office Limited 7 did not have a law -- lawyers. It used group lawyers, 8 and they were the people who actually made the 9 decisions, gave the advice, and so on. 10 Q. At the time, to what extent did you consider the 11 position of the Post Office to be unusual, being 12 simultaneously the alleged victim, the investigator and 13 prosecutor? 14 A. At the time, I accepted it as part of what the company 15 did. Subsequently, I can understand how that is 16 a potential conflict. 17 Q. At the time that you were part of the Executive Team and 18 a member of the Board, did you recognise that there were 19 risks inherent in that position? 20 A. Not sufficiently. 21 Q. Do you accept now that these were foreseeable risks, 22 taking one example, that the interests of the business, 23 in particular financial interests of the business, might 24 improperly influence the conduct of investigations and 25 prosecutions? 33 1 A. I can see now, looking back, that that could well be the 2 case. 3 Q. Why do you think it was you didn't see that at the time? 4 A. I think -- and, you know, this is hard -- I think, 5 having come through a system where the Investigation 6 Division and the Legal Division had always acted in 7 an autonomous way, I think it was very difficult to see 8 through that at the time. 9 Q. Knowing what you did about the potential for incomplete 10 or inaccurate transactions to be recorded by the Horizon 11 system, setting aside the control procedures which you 12 understood would be in place, there was a further 13 particular risk, wasn't there, that unreliable data 14 might be used in support of prosecutions; do you accept 15 that? 16 A. I would accept now with what I know, yes. 17 Q. Did you recognise that at the time? 18 A. I didn't. 19 Q. Do you think that is a risk that you should have 20 recognised at the time? 21 A. Looking back from here, yes. 22 Q. Was this a risk that the board as a whole identified at 23 any point before you retired? 24 A. Not as far as I'm aware. 25 Q. You refer twice in your statement to your working 34 1 relationship with Tony Marsh, who was the Post Office 2 Limited Head of Security, at paragraph 14 and at 3 paragraph 55. Could we have paragraph 14 of Mr Miller's 4 second statement on screen, please. It is page 5. 5 Looking, please, at the last sentence in 6 paragraph 14 -- or the last two sentences: 7 "I have no memory of a POL/RMG 'problem management 8 team' [I think that refers to the part above, 9 apologies). POL/RMG Security worked to Group although 10 they were described as 'embedded' in POL. I met Tony 11 Marsh regularly for approximately an hour and he had 12 access to me at any time." 13 Then going, please, to page 13 of the statement, to 14 paragraph 55, you refer to a document there and we'll 15 come on to that: 16 "... Tony Marsh worked for the Group Security 17 Director with a dotted line to me. He was designated 18 Head of Security in POL. I met him regularly and he had 19 access to me at any time if I was available. I had 20 a good working relationship with him and I trusted him." 21 The document you refer to here are the minutes from 22 the Post Office Limited Board meeting on 20 August 2003. 23 The regular meetings you had with Tony Marsh -- the ones 24 you refer to in those paragraphs we've just looked at -- 25 did these start when you took up the role of Operations 35 1 Director in 2001 or was it later? 2 A. I honestly can't remember. But there is some -- there 3 is still some confusion in my mind because Tony Utting, 4 who was -- and this -- he was familiar to this 5 Inquiry -- he had a line of reporting in the Finance 6 function, so he worked, according to his testimony, 7 through to Rod Ismay who worked for Peter Corbett. 8 During the time when Tony and I worked together, he 9 actually worked for the Group Security Director with 10 what was known as a dotted line to me. So it was 11 a confused situation, looking back on it. 12 Q. It was Tony Marsh's evidence to the Inquiry that, at 13 least at one point, he reported to you. Would you 14 accept that that is correct, that de facto -- 15 A. I don't -- I'm sorry, I do not recall that. 16 Q. Could we look, please -- 17 A. Except, I'm sorry, if I may just -- when I was Managing 18 Director of Post Office Network, he was in a line 19 working to somebody who worked to me. 20 Q. The August 2003 board minutes that you refer to at 21 paragraph 55 -- and perhaps if we could have those up on 22 screen. That's POL00021483. Looking at page 8, 23 please -- scrolling down, please -- we see here an item 24 "Delivering Security Standards in the Agency Branch 25 Network -- Strategic Choices". Under this: 36 1 "Tony Marsh presented the security paper to the 2 Board, on behalf of David Miller." 3 Can you help us with why he was presenting this 4 security paper to the Board on your behalf, if it wasn't 5 that he was reporting up to the board through you? 6 A. I can't, I'm sorry. 7 SIR WYN WILLIAMS: Ms Price, am I right in thinking that 8 Mr Miller was present himself? 9 MS PRICE: Yes, sir. If we can go to the first page of that 10 document. 11 SIR WYN WILLIAMS: So does that jog your memory, Mr Miller? 12 For some reason, Mr Marsh is making a presentation on 13 your behalf. 14 A. It doesn't, I'm sorry. 15 SIR WYN WILLIAMS: Thank you. 16 MS PRICE: Setting aside the strict reporting lines, the 17 activities that were conducted under the remit of Post 18 Office Head of Security would have fallen under 19 Operations, would they not? 20 A. Yes. 21 Q. Those activities included criminal investigations and, 22 to the extent that the Security Team had involvement in 23 prosecutions, their involvement in prosecutions brought 24 by the Post Office -- 25 A. Can I just question that, because Tony Utting's 37 1 evidence, when he was Head of Investigations, was that, 2 as I said, he worked through the Finance line. 3 Q. It may be that we can't bottom that out through your 4 evidence and the Chair has the evidence from Mr Utting 5 and others who were involved in prosecutions over the 6 years. But, taking a step back, the activities under 7 Tony Marsh, which certainly included criminal 8 investigations, we've already agreed that those fell 9 under Operations. So was that why you had regular 10 meetings with Tony Marsh, because the activities 11 conducted under him fell under operations and you 12 achieved -- 13 A. The broad area of Tony's remit, which was pretty wide, 14 including terrorism, and so on, he would -- yes, we 15 would discuss on a regular basis. 16 Q. Can you help with -- I think you weren't sure when your 17 meetings with Tony Marsh started but did they continue 18 until your retirement -- 19 A. They did, yes. 20 Q. -- except in the period you were temporary Managing 21 Director? 22 A. Yes. 23 Q. How regular were your meetings with Tony Marsh? 24 A. I -- either monthly or three-monthly. 25 Q. Those meetings lasted around an hour? 38 1 A. Yes. 2 Q. How soon after you started meeting with Tony Marsh did 3 you first discuss Post Office criminal investigations 4 and prosecutions? Can you recall? 5 A. I can't recall. 6 Q. Do you remember discussing those activities with him? 7 A. I don't remember discussing any detail of those with 8 him. 9 Q. Did you discuss with him your knowledge of the history 10 of Legacy Horizon, including the issues relating to 11 inaccurate cash accounts, which were still being 12 addressed when you left the Programme Director role? 13 A. I don't recall doing that. 14 Q. You don't recall doing so or you didn't; can you say? 15 A. I don't recall doing so. 16 Q. Do you consider that that would have been relevant 17 information for Tony Marsh to have had, given his role 18 in relation to investigations and prosecutions? 19 A. On reflection, and I have reflected on this very hard, 20 when I finished being the Horizon Programme Director, 21 I think it would have been very beneficial if I had 22 notified both the lawyers and the ID that that Horizon 23 was a new system coming in and that they should be very 24 cautious in looking at evidence coming out of that 25 system. I didn't do that and I regret not doing it. 39 1 Q. It was Tony Marsh's evidence to the Inquiry in July of 2 last year that no one ever suggested to him that there 3 were system faults and that Investigators like him had 4 absorbed a very strong belief from the business that the 5 Horizon system was robust. Where do you think he and 6 his Investigators gained this very strong belief from? 7 A. I think it was -- it depends what time frame we're 8 talking about. 9 Q. If we cover just the time frame between you starting as 10 Operations Director until your retirement. 11 A. Yes, I was unaware of ever putting out any messages that 12 Horizon infallible. So I'm, in the early days, I'm not 13 clear where those messages were coming from. 14 Q. Notwithstanding the close working relationship you had 15 with Tony Marsh, do you maintain, as you say at 16 paragraph 15 of your statement, that you were not 17 involved in the oversight of investigations or 18 prosecutions? 19 A. I do and I go back to the evidence about Tony Utting and 20 who he -- where he worked for, and he was Head of 21 Investigations. 22 Q. When David Mills took up the role of Chief Executive 23 officer in April 2002 and you were Operations Director, 24 you had a role helping him to understand the business. 25 Did you share with him any information about the history 40 1 of Legacy Horizon? 2 A. We discussed Horizon, how it had come about, 3 particularly the impact that the programme had had, the 4 departure of the Benefits Agency. So he got the history 5 in that sense. 6 Q. Did you raise with him any of the issues there had been 7 relating to inaccurate cash accounts ahead of rollout? 8 A. No, I don't think we discussed that level of detail. 9 Q. Did you raise with him any of the problems that 10 subpostmasters had been experiencing in the live trial 11 that had been raised with you? 12 A. I can't remember. I don't think I did. 13 Q. You covered in your Phase 2 evidence another Acceptance 14 Incident relating to training. Did you raise any 15 training issues that had arisen? 16 A. Yes, we had discussed that and I think he picked that up 17 in talking to subpostmasters when he was out in the 18 field anyway, and probably took some action on that. 19 Q. Did you not consider, at the time, the history relating 20 to inaccurate cash accounts to be relevant information 21 for Mr Mills coming into the business? 22 A. Not at the time. 23 Q. Do you recognise that to be important information he 24 should have had now? 25 A. I think it would have helped. It's a question of the 41 1 weight that I put on that information. I would put 2 greater weight on it now than perhaps I did then. 3 Q. Why is it that you would put greater weight on it now 4 than you did then? 5 A. Because of everything that we've learnt over the past 6 two or three years. 7 Q. Could we have on screen, please, POL00021482. These are 8 the minutes of a Post Office Limited Board meeting which 9 took place on 19 June 2003. You were present in your 10 role as Chief Operating Officer. Going to page 2, 11 please, under "Chairman's Business", there is a heading 12 "(b) Horizon", and the minutes record this: 13 "The Chairman expressed a particular interest in 14 furthering his understanding of the capabilities and 15 limitations of the Horizon system. Meetings would be 16 arranged with the appropriate managers to provide the 17 chairman with a detailed overview ..." 18 The person listed to action this was Alan Barrie. 19 What role was he holding at the time? 20 A. He was the IT Director. 21 Q. This was a relatively new chair of the board, wasn't it, 22 were Michael Hodgkinson? 23 A. It was. 24 Q. He was expressing an interest in the capabilities and 25 limitations of the Horizon system. Did you offer any 42 1 information on the history of the introduction of Legacy 2 Horizon at this meeting? 3 A. Not at this meeting, no. 4 Q. Did you attend the meetings which were due to be 5 arranged by Alan Barrie? 6 A. No, I didn't. I wasn't invited. 7 Q. Did you feed into the agendas for those meetings or 8 suggest that the Chair be told about the history of 9 Legacy Horizon? 10 A. I don't recall doing that, no. 11 Q. I can't recall who was involved in the meetings? 12 A. I can't, I'm sorry. It was under -- Alan Barrie was at 13 the same level of director as I was, and he was dealing 14 with that issue. 15 Q. Did you provide any other input on or information about 16 the known problems in the history of Horizon's 17 development to the Board, either at this stage or 18 before? 19 A. Not that I'm aware of. 20 Q. Was it not relevant information for the Chair and the 21 Board to know that there had been weaknesses and faults 22 identified in the process of getting Horizon to roll 23 out? 24 A. Yes, that was known within the IT Directorate. 25 MS PRICE: Sir, I've reached the end of one topic. Might 43 1 that be an appropriate moment for the morning break? 2 SIR WYN WILLIAMS: Yes, of course. Yes. So what time shall 3 we recommence? 4 MS PRICE: 11.35, sir. 5 SIR WYN WILLIAMS: Certainly. 6 MS PRICE: Thank you. 7 (11.17 am) 8 (A short break) 9 (11.35 am) 10 MS PRICE: Hello, sir, can you see and hear us still? 11 SIR WYN WILLIAMS: Yes, I can. 12 MS PRICE: Mr Miller, I'd like to turn, please, to reports 13 you received, when you held director roles, of 14 subpostmasters experiencing problems with Horizon, 15 including unexplained shortfalls and attributing 16 shortfalls to the Horizon system, starting, please, with 17 POL00093084. 18 This is a case summary prepared by a Post Office 19 Retail Line Manager about a subpostmaster in Ramsgate 20 who was experiencing balancing problems. There was 21 a shortage of almost £77,000, revealed following 22 an audit on 13 June 2003. The subpostmaster had refused 23 to accept responsibility for the loss and had complained 24 that he had not been given the chance to interrogate the 25 Horizon system to prove that the loss was caused by the 44 1 system. 2 If we could go to page 6 of this document, please, 3 the penultimate paragraph on this page. So at 4 paragraph 7, just above that paragraph, we can see some 5 explanation by the Retail Line Manager of process that 6 had been adhered to. Then underneath those points: 7 "Further to this, the paperwork has been reviewed by 8 Ria MacQueen and then by Dave Miller, (Chief Operating 9 Officer, POL) following a flag case complaint from 10 Mr Andrews' constituency MP and all was found to be in 11 order. Indeed, Mr Miller emailed a response to this 12 effect to Mr Andrews on 10 July 2004, in which he 13 stated: 'the agreed processes have been followed in this 14 case and I can find no evidence to support your 15 allegations of unfairness'." 16 Do you have any recollection of this case now? 17 A. I have read and re-read this since I got it last week 18 and I'm -- I cannot recall this case. Sorry, genuinely, 19 I can't recall and I know I'm -- you know, I'm referred 20 to in here, as being part of this. 21 Q. How regularly were you involved in responding to 22 complaints, whether addressed directly to you or 23 reaching you via an MP? 24 A. Not a lot, because there would be some sort of flag case 25 office, where people -- where those would be dealt with. 45 1 I don't know why I was involved in this particularly. 2 I'm really sorry but I just don't know. 3 Q. Does it follow that you can't help with whether you had 4 any concerns about the nature of this complaint at the 5 time? 6 A. Well, I have to say, having read it, I have serious 7 concerns because I think somewhere in here there's a -- 8 there's the line, perhaps I've seen too often, which is 9 that the subpostmaster couldn't prove that the system 10 was wrong, and I think that's featured here and that's 11 unfortunate. 12 Q. Do you think that you had concerns at the time? I know 13 you can't remember this particular case but, if you'd 14 seen it at the time, would you have had the same 15 concerns you have now? 16 A. No. 17 Q. Why not? 18 A. Because the -- there was clearly, bubbling up within the 19 business, that there were issues with regard to Horizon. 20 The extent to which those were being properly surfaced 21 was really quite small and, I mean, if I -- it says 22 I have reviewed this, I have reviewed the thing, the 23 particular thing, that says he couldn't prove that 24 Horizon was wrong, and accepted that, and, you know, 25 that is clearly an error. 46 1 SIR WYN WILLIAMS: Before you go any further, the expression 2 "a flag case complaint" in that paragraph that Ms Price 3 took you to, it may be my fault, but I don't think 4 I recall that precise phraseology previously. Can you 5 explain what a -- 6 A. Yeah, normally, sir, it's from an MP or somebody -- but 7 normally an MP, and there is a process for dealing with 8 those. There would be a person whose responsibility it 9 was within the business to deal with those, to deal with 10 the process, to make sure the paperwork was done. It 11 would get priority. 12 SIR WYN WILLIAMS: So, in other words, a complaint which is 13 taken pretty seriously -- 14 A. Yes. 15 SIR WYN WILLIAMS: -- or should be? 16 A. Yes. 17 SIR WYN WILLIAMS: Right. 18 Sorry, Ms Price. 19 MS PRICE: Not at all, sir. 20 Could we have on screen, please, NFSP00000298. This 21 larger document contains a series of correspondence 22 involving a subpostmaster at the Crianlarich branch, the 23 NFSP and you. The subpostmaster's letter appears on 24 page 8 of this document. Can we go to that, please. 25 This letter -- scrolling down a little, please -- 47 1 scrolling back up again, please. 2 This letter is dated 24 August 2004 and it raises 3 issues accessing online services on Horizon due to 4 failure in the ISDN line. It also raises some unhelpful 5 responses which were received after contact with the 6 Horizon Helpdesk and the Network Business Support 7 Centre. 8 The issue was raised with David Mills by the NFSP 9 and you responded on his behalf on 15 September 2004. 10 That's on page 4, please. We can see here: 11 "Thank you for your letter of 2 September addressed 12 to David Mills. 13 "Overall Horizon systems availability is good, there 14 are nevertheless issues which we have under active 15 review and I will update you on these as we make 16 progress. 17 "Our online systems continue to perform within 18 expected parameters and these parameters have been set 19 in line with industry standards. For example the 20 service availability that we have planned and deliver 21 for banking and e-top ups is in line with that provided 22 by the banks and other retail outlets. 23 "Understandably there is a perception that the 24 problems are on the increase. This is because over time 25 the number of branches that have experienced a problem 48 1 has, as you would expect, increased and as the volume of 2 online business has increased the impact of failures has 3 increased. I repeat that overall system available is 4 very high and within the parameters to which the system 5 was built. 6 "When a system goes down in a branch a process of 7 investigation is initiated in order to identify where 8 the problem has occurred. The problem could be with the 9 equipment within the branch, within the 10 telecommunications network, within Horizon or within 11 a number of back end systems provided by banks, mobile 12 phone operators and our debit card service provider. 13 Once the point of failure is identified the appropriate 14 supplier can investigate the problem and having 15 diagnosed it provide an appropriate fix. 16 "It is not possible when an incident occurs to give 17 precise information about time to fix ahead of 18 understanding where the problem lies. Of course in some 19 instances the source of the problem is obvious and it's 20 possible quite quickly to indicate time to fix but in 21 other instances diagnosis can be protracted." 22 Going back to the first paragraph, can you help with 23 what the issues which were under active review were at 24 this time? 25 A. I think the issues -- this is, as I recall, about the 49 1 ISDN lines, which were the basis of the network at that 2 time and there was variable performance. If people were 3 at the outer reaches of the ISDN network or in 4 a particular difficult location, problems could occur 5 and fixing those problems could take longer than it 6 ought to, and subpostmasters rightly got very fed up 7 when they couldn't connect, they couldn't do online 8 business, and there was a queue out the door of people 9 who were customers who were very unhappy. 10 So I think that would be my view of what, primarily, 11 this was about. Certainly, it was strongly represented 12 by the NFSP at the time. 13 Q. You will recall from the document which Jeremy Folkes 14 authored in February 2000 the section relating to 15 unproven technology when it came to integrity during 16 failure conditions. Did you recognise at the time any 17 risk that there might be an impact of system failures on 18 SPMs in terms of the integrity of accounts data when 19 these issues were raised? 20 A. I don't think that was front of my mind at all. 21 Q. Would you have expected a root cause analysis to have 22 been done by Fujitsu in these circumstances? 23 A. I think that would have been very helpful. 24 Q. As far as you're aware, was there any investigation, 25 whether by the Post Office or Fujitsu, as to any impact 50 1 on the integrity of the data, the accounts data? 2 A. I'm not aware. 3 Q. Did the issues raised in this correspondence or indeed 4 in the report we've just looked at from the Retail Line 5 Manager, have any impact on your view of what data would 6 need to be obtained from Fujitsu, from Post Office's 7 internal IT teams, or anyone else, to support actions 8 against subpostmasters? 9 A. No. 10 Q. Turning, please, to the civil proceedings brought by the 11 Post Office against Julie Wolstenholme and the 12 settlement of those proceedings, you deal with this at 13 paragraphs 57 to 61 of your second statement. Is it 14 right that this case first came to your attention when 15 Ms Wolstenholme was challenging her employment status in 16 2001? 17 A. That's correct. 18 Q. But, at that stage, you say you were not made aware that 19 Ms Wolstenholme was challenging the Horizon system; is 20 that right? 21 A. That is right, just what she was doing was -- would be 22 considered by me and others to be a threat to the 23 whole -- if she was wanting to change the 24 subpostmaster's contract and challenged that, that would 25 be a significant challenge to the business model. So 51 1 that would have been -- when I say that, I mean that it 2 would have changed the economics of how we ran the 3 business, if she had won her case. 4 Q. Could we have, please, page 14 of Mr Miller's second 5 statement on screen, paragraph 59. That's page 14. You 6 say: 7 "My first formal involvement with the case was that 8 I was asked to sign off the compensation payment to 9 Ms Wolstenholme in 2004, in the absence of 10 Peter Corbett, who was on holiday. Rod Ismay's note to 11 Donna Parker (my PA at the time) secured a slot in my 12 diary for Tony Marsh"? 13 Rod Ismay's note, to which you refer here, is at 14 POL00142503. Could we have that on screen, please. 15 This is the email from Rod Ismay, dated 26 July 2004. 16 What role did Rod Ismay hold at this time? 17 A. I think he was head of some part of accounting. He was 18 a direct report to Peter Corbett, so he's one step below 19 the Board. 20 Q. The Donna Parker here, that's your PA; is that right? 21 A. That was my PA, yes. She was my PA, I'm sorry. 22 Q. Presumably she would have forwarded on to you the email 23 she received, along with any attachment; is that right? 24 A. Yes, I think she would. 25 Q. We can see the email was also sent to Mandy Talbot, Tony 52 1 Marsh and Carol King; do you remember Mandy Talbot? 2 A. I am aware of Mandy Talbot from this Inquiry, not 3 previously. 4 Q. Does it follow that you did not have much contact with 5 Mandy Talbot? 6 A. I didn't, no. 7 Q. And Carol King? 8 A. Sorry. 9 Q. Before we come on to the detail of this email, I'd like 10 to look at one further document, please. Could we have 11 on screen, please, POL00158493. This is an email dated 12 19 May 2004 from Keith Baines to David Mills, the Chief 13 Executive Officer, copied to Clare Wardle, Carol King, 14 and Ian O'Driscoll. Can you recall Clare Wardle or Ian 15 O'Driscoll at all? 16 A. Don't recall Clare Wardle. I recall Ian O'Driscoll's 17 name but that's about as far as it goes. 18 Q. The title of the email is "Action from your visit to the 19 IT Commercial Team meeting", and the email reads as 20 follows: 21 "David, 22 "You asked who in Post Office was instructing the 23 lawyers in the case referred to in the following risk on 24 the IT ... register: 25 "'Damage to reputation of Post Office and potential 53 1 future financial losses if PO loses court case relating 2 to reliability of Horizon accounting data at Cleveleys 3 Branch Office.' 4 "The instructions have been provided by Carol King 5 (in Transaction Processing). The case was being handled 6 by Jim Cruise in Legal Services. Jim has now left Royal 7 Mail and the work is outsourced to Weightman Vizards, 8 who handle such cases for us in the North West. The 9 case is scheduled for the week commencing 16 August. We 10 have offered settlement and paid money into court based 11 on what the subpostmistresses would have received for 3 12 months notice. 13 "Regards, 14 "Keith." 15 It would appear from this email that the case with 16 Ms Wolstenholme had been recorded on the IT risk 17 register. To the extent that you can assist, which risk 18 register was this: a Post Office Limited risk register 19 or a Royal Mail Group risk register? 20 A. I don't know. I would think, given the people involved 21 in here, it was a Post Office IT Department risk 22 register. 23 Q. Were you aware that the case was on the IT risk register 24 when you became involved? 25 A. No. 54 1 Q. Did you have access to the IT risk register? 2 A. No. 3 Q. How was the Board kept updated about what was on the IT 4 risk register? 5 A. The IT risk register should have fed up -- upwards to 6 the Board risk register, as felt appropriate by the 7 IT Director. 8 Q. To your knowledge, did that happen? 9 A. I don't know, I'm sorry. 10 Q. Okay. 11 A. I certainly had not seen this posed in this way as 12 a risk. 13 Q. This email pre-dates the email from Rod Ismay to your 14 PA. Do you recall David Mills discussing this case with 15 you, once he had noticed it was on the IT risk register? 16 A. I don't. 17 Q. But it would appear that this was a case of which the 18 Post Office Limited Chief Executive was aware? 19 A. It does appear to be, yes. 20 Q. This was quite significant, was it not, the entry onto 21 the risk register of a case which had the potential to 22 damage the reputation of the Post Office because it 23 related to the reliability of Horizon accounting data at 24 the branch? 25 A. Yes. 55 1 Q. This is something that the Board should have been made 2 aware of, wasn't it? 3 A. Yes. 4 Q. It appears that the instructions were being given to the 5 lawyers on behalf of the Post Office by Carol King in 6 Transaction Processing. You don't recall Carol King, 7 but does that fit with your understanding of who would 8 give instructions in a debt recovery case, in essence? 9 A. I think that's probably right but I can't say 10 definitively. 11 Q. Going back, please, to Rod Ismay's email, POL00142503, 12 the email to your PA reads as follows: 13 "Donna -- as discussed, here is the correspondence 14 re the legal case. 15 "The first arrow below contains a note from Group 16 Legal today (Mandy Talbot is acting on this case). This 17 is Counsels Opinion. 18 "The other arrow sections below contain some more 19 background from Carol King in Chesterfield Debt Recovery 20 Team. 21 "In summary we suspended Mrs Wolstenholme in 2001 22 after apparent discrepancies in her cash accounts. We 23 claimed for the value of these losses and she 24 counterclaimed for loss of earnings. Within her claim 25 was an 'experts opinion' which was unfavourable 56 1 concerning Horizon and Fujitsu. 2 "We have lodged 25K pounds in court but Mrs W has no 3 legal representation and is pursuing the full amount of 4 her claim (£188k). It goes to court next month. 5 "Mandy -- Peter Corbett is on holiday now. I am 6 therefore escalating this to Dave Miller." 7 Presumably he was doing that by sending this email 8 to your PA; is that right? 9 A. Can I just make a point? 10 Q. Yes. 11 A. Peter Corbett and I were on the same level, we were both 12 Directors of Post Office Limited. So, in my mind, 13 escalation would have been to the level above but it 14 wasn't and, at the time, I should have asked that 15 question. 16 Q. So you think it should have been escalated to the level 17 above? 18 A. Well, as far as I'm concerned, yes. 19 Q. Why didn't you escalate it to the layer above? 20 A. Because I was dealing with it at speed and I signed it 21 off. 22 Q. In this email, the part to Mandy then goes on: 23 "Do you have a copy of the IT 'expert's opinion'?" 24 Then there is a question for Tony Marsh: 25 "Tony -- can you please advise who in your team is 57 1 leading in this case? 2 "Carol -- thanks for your correspondence this 3 afternoon." 4 Then at the bottom: 5 "All -- please do not circulate this any further 6 than is necessary to support Dave and Group Legal with 7 this case." 8 Would you have read this email when you received it? 9 A. No, because it would have gone to Donna. But I have 10 subsequently read it and noted that bottom line. 11 Q. I asked earlier whether Donna would have forwarded the 12 email and any attachment to you when she received it and 13 you thought that was probably right. 14 A. I did. 15 Q. If she did forward it to you, would you have read it? 16 A. Yes. 17 Q. The summary given in the top of the email was that the 18 case arose out of apparent cash account discrepancies 19 and that, within her claim, was an expert's opinion 20 which was unfavourable concerning Horizon and Fujitsu. 21 Your attention was being directed, through your PA, to 22 two things: first, counsel's opinion on the case, which 23 was attached, we can see, to the email; and, second, the 24 background to the case from Carol King from the email 25 chain below. 58 1 Starting, please, with the background to the case, 2 this, in fact, appears to have been sent by Jim Cruise. 3 If we can scroll down to page 3 in his email, dated 4 17 March 2004, the background is quite lengthy but it 5 contains this in relation to the expert's report. Going 6 over the page, please, to page 4, the third paragraph on 7 this page: 8 "POL then agreed to offer her up to £5,000 to 9 settle. This sum was paid into court in July 2003 but 10 has not been accepted. Since then, the report of the 11 computer expert, Best Practice Plc, based on the 12 available call logs has been received and as you are 13 aware is unfavourable and unflattering to Fujitsu if not 14 actually hostile. In light of the report, which cannot 15 really be challenged, I do not think that POL will be 16 able to prove, even on the balance of probabilities, 17 that the losses were the fault of the SPM and our agents 18 are still concerned about the lack of evidence for the 19 losses. They want to obtain counsel's opinion on 20 liability and quantum and the question of mediation has 21 now been raised at the recent CMC." 22 The next paragraph says this: 23 "At court Mrs W said that she would settle for two 24 and a half times her annual remuneration, a total figure 25 in the region of £187,500, as this is the figure being 59 1 paid to subpostmasters when offices are closed. POL 2 clearly cannot settle on the basis of such a sum but the 3 question of further questions to the expert has been 4 raised and I can only see further costs being run up in 5 this case with very little chance of POL getting its 6 money even if it proves the case. I intend therefore to 7 advise that POL should pay Mrs W or pay into a court the 8 figure of 3 months remuneration plus interest on the 9 basis of that although it is unlikely that POL can now 10 prove the losses were her fault alone, as per the 11 contract for services, POL can give 3 months notice 12 without giving reasons and this all she will be able to 13 obtain by way of damages in any event if she takes the 14 matter to trial. The payment-in should be of another 15 £20,000 to take account of interest since November 2000. 16 If it is not accepted the case will have to be fought to 17 resist the counterclaim which cannot be accepted but 18 costs should be cut by accepting the expert's report and 19 not seeking to challenge it further and effectively not 20 pursuing the losses and paying her full remuneration for 21 the 3-month notice period on the basis that this is all 22 she will obtain by way of damages after a full trial." 23 This was part of the email chain to which you were 24 referred in the top email, via your PA. Would you have 25 read this at the time? 60 1 A. I can't remember. But -- I can't, sorry. I cannot 2 remember. 3 Q. Okay. Do you remember having concerns at the time that 4 there was a computer expert report which was 5 unfavourable and unflattering to Fujitsu? 6 A. I -- there was conflicting information about this report 7 and I have read it thoroughly in the papers that you 8 have given me and the descriptions from various angles 9 that were given to me of it seemed to me to be unfair. 10 Q. In what way do you consider -- 11 A. That Mr Coyne actually did, within the information 12 available to him, a good job and that didn't suit 13 various parties, including Fujitsu, and I think the 14 Inquiry has heard about that from Mr Jan Holmes, 15 previously. But, certainly, it wasn't given sufficient 16 weight. 17 Q. Going back to the last line of Rod Ismay's email -- and 18 there is no need to turn it up -- but Rod Ismay was 19 asking recipients not to circulate this any further than 20 necessary to support you and Group Legal with the case. 21 Can you help with why he would have asked recipients not 22 to do that? 23 A. No. 24 Q. Coming, then, to counsel's advice. Could we have 25 paragraph 60 of Mr Miller's second statement up on 61 1 screen, please, that's page 14. In the first sentence 2 of this you say: 3 "As far as I recall I was not given a copy of the 4 expert report or counsel's advice nor did I request 5 it -- I definitely did not read it at the relevant 6 time." 7 We've seen from the email we've just looked at that 8 counsel's advice was attached to the email sent to your 9 PA. Does it remain your position that you didn't open 10 it and read it at the time? 11 A. It does, I'm afraid, yes. 12 Q. Why would you not have read it, given the summary of the 13 case given to you and the background set out in the 14 email chain? 15 A. Because the way this was channelled through to me was 16 such that it came from a very senior finance officer and 17 the Head of Security and I -- I mean I have drawn this 18 case to your attention because I should have said, 19 "Stop, let's review this properly and let's understand 20 what this actually says". But I didn't and I signed off 21 a sum of money, and it was paid. We had agreed to pay 22 this lady and we then paid her. That was kind of my 23 view. But there were other views in this, as we can see 24 from the paperwork, that people wanted to keep it quiet. 25 Q. Looking, please, to counsel's advice, if we can have 62 1 that on screen, please. It's POL00118229. Going first, 2 please, to page 18 towards the bottom of the page. We 3 can see this is dated -- towards the bottom, please -- 4 26 July 2004 and it's been provided by a barrister from 5 9 St John Street. Going straight to the key paragraphs, 6 starting, please, with paragraph 10 on page 3, counsel 7 says this: 8 "Mrs Wolstenholme has defended the proceedings, 9 claiming that the computer system installed by the Post 10 Office was defective and this was, in fact, the cause of 11 the losses recorded within her accounts. Further, 12 Mrs Wolstenholme puts the Post Office to strict proof of 13 the losses it claims. Finally, Mrs Wolstenholme 14 counterclaims for damages in respect of: wrongful 15 termination of her contract; breach of her human rights, 16 a claim under the Commercial Agents ... Regulations; 17 a claim for breach of the implied term to provide 18 a computer system fit for its purpose." 19 At 11: 20 "The trial of this matter is now about one month 21 away. A joint computer expert's report has been 22 obtained. This report concludes, from the limited 23 records available, that the computer system installed by 24 the Post Office did appear defective. There is a very 25 limited amount of documentation available in respect of 63 1 the detail of calls made by Mrs Wolstenholme and 2 problems with her computer at the relevant time as well 3 as in relation to the errors and losses which built up 4 in her Post Office records. This is because these 5 records were destroyed about 18 months after events 6 occurred." 7 Going down, please: 8 "Recognising the weakness of its position, the Post 9 Office has made a payment into court of £25,000." 10 At 13: 11 "I am asked to advise in relation to quantum and 12 evidence. I am asked to take into particular account 13 that the Post Office is anxious for the negative 14 computer expert's report to be given as little publicity 15 as possible." 16 Pausing there, can you help at all with where the 17 message that the Post Office was anxious for the 18 negative computer expert's report to be given as little 19 publicity as possible came from? 20 A. No, I can't. Well, sorry, just to say it didn't come 21 from me. 22 Q. Does this reflect a sensitivity, even at this relatively 23 early stage in 2004, about the integrity of the Horizon 24 system? 25 A. And particularly any publicity being given to that, yes. 64 1 Q. Going, then, to paragraph 17, page 5, please. 2 "In view of the negative expert's report in this 3 case regarding the computer system in place, 4 Mrs Wolstenholme's suggestion that the errors that arose 5 were the result of defects in the computer system must 6 be taken seriously. It is sufficient to place genuine 7 and significant doubt on the evidence relied upon by the 8 Post Office. In my opinion, to dispel that doubt and to 9 persuade a Court that its claim was justified, the Post 10 Office would need to be able to produce to the Court 11 sufficient original evidence in support of its claim. 12 It is unable to do so. I therefore conclude that the 13 Post Office's claim against Mrs Wolstenholme in respect 14 of losses on her account would be likely to fail." 15 This opinion is extremely significant, isn't it, 16 that because of the negative expert's report, 17 Mrs Wolstenholme's suggestion that the errors that arose 18 were as the result of defects in the computer system 19 must be taken seriously? 20 A. Yes. 21 Q. Had you read this at the time, what would you have done? 22 A. Well, I'd have had to say, "Hang on a minute, can we 23 just understand exactly what is going on here?" So I'd 24 have had to have a meeting of senior people to review 25 everything that was down here. There was a lot of 65 1 knocking of the computer expert's opinion at the time by 2 both Fujitsu and Post Office and, subsequently, I've 3 read what Justice Fraser had to say about it and that 4 was entirely wrong. Justice Fraser said he was right 5 and, if you read the report, which I've done now, it's 6 believable. 7 Q. Could we have back on screen, please, paragraph 59 of 8 Mr Miller's statement, that's page 14. Starting at the 9 second sentence, you refer to the email securing a slot 10 in your diary for Tony Marsh. Can you recall how long 11 after Rod Ismay's email you met with Tony Marsh to 12 discuss this? 13 A. I can't but I remember that I learnt about it on the 14 day. 15 Q. You learnt about it on the day of the email you mean? 16 A. No, on the day that Tony came to see me. 17 Q. I see. So how did you become aware? 18 A. Donna said, "Tony Marsh needs to see you urgently", or 19 words to that effect. I'm sorry, I can't remember. But 20 I do remember -- the whole thing I remember about this 21 is that it kind of just happened. It wasn't a "There's 22 a process here to review something". It was "Need to 23 get this done and Tony Marsh wants to get into your 24 diary, it won't be for long", and I have to say I went 25 along with that. 66 1 Q. Did you read anything before you met Tony Marsh? 2 A. I can't remember what I read. I'm sorry, I can't. 3 Q. You say: 4 "We met for approximately 10-15 minutes. To the 5 best of my memory, he told me there was an issue with 6 the expert advice which had led our counsel to say that 7 the case was unlikely to succeed. It was clear that he 8 did not think much of the expert. The view was that we 9 should cut our losses and pay up. He said something 10 about Horizon -- I cannot recall specifically what he 11 head but I remember checking with him whether there were 12 issues with Horizon (I said something like: 'you are not 13 saying there are issues with Horizon are you, Tony?') 14 He said that there were no issues and I got the 15 impression it was a one-off case. During the meeting, 16 he produced some paperwork to authorise payment which 17 I signed." 18 So your recollection is that you signed off the 19 authorisation of settlement at the meeting; is that 20 right? 21 A. Yes, it is. 22 Q. You did so without having read counsel's advice or 23 requesting the expert's opinion? 24 A. I did. 25 Q. Why didn't you ask to see the expert advice when Tony 67 1 Marsh discussed it with you in the meeting? 2 A. This came to me, as I say, as a on-the-day issue. It 3 came from a very senior Finance person and from the Head 4 of Security, who I trusted, and I regret, obviously, 5 very much not having said, "Stop, let's actually review 6 what's going on here", but I didn't. 7 Q. It may be that you can't assist at this remove but what, 8 exactly, did Tony say about the issues with Horizon or 9 lack thereof? 10 A. I can't -- I mean, for this distance, I can remember 11 quite a lot about this because, clearly, I must have 12 been uneasy but I can't remember the detailed -- the 13 really detailed conversation. In fact, this was so 14 quickly done, that I doubt if there was a lot of 15 detailed discussion. 16 SIR WYN WILLIAMS: You do say, Mr Miller, that you asked 17 him, in effect, a direct question -- whether there were 18 issues with Horizon -- and then you say what you might 19 have said in the brackets that follow, and you appear to 20 be saying that he confirmed to you that there were no 21 issues with Horizon. Yes? So I am a little bit 22 mystified how that could sit with the terms of the email 23 which Mr Ismay had sent. Because the whole case was 24 about whether there was an issue with Horizon. 25 A. Yeah, I'm, sorry, sir, I'm not going to be able to help 68 1 you. 2 SIR WYN WILLIAMS: Well, one interpretation -- and I'm 3 simply putting forward possibilities, not expressing 4 conclusions -- one interpretation is that, knowing that 5 you hadn't read the relevant documents yourselves, in 6 effect, Mr Marsh misled you. Does that sit with your 7 understanding of Mr Marsh? 8 A. The way I'm looking back now and seeing how this was 9 done does not sit with my opinion or previous opinion of 10 Mr Marsh, which is that I trusted him implicitly. 11 SIR WYN WILLIAMS: The other alternative, which perhaps does 12 sit with what you're trying to articulate, is that, 13 despite Mr Coyne being a jointly instructed expert 14 approved by the court, there were those in Fujitsu and 15 the Post Office who just weren't prepared to accept his 16 opinion and, therefore, decided that what they'd do was 17 to get rid of this case, for as cheaply as they could 18 and then pretend it never happened; is that more likely? 19 A. I think there was clearly a desire within the business 20 to get this -- to get rid of this case. 21 SIR WYN WILLIAMS: Yes, whereas, in fact, if responsible 22 people within the business had treated Mr Coyne's 23 opinion seriously and carried out some investigations of 24 their own, it might have prevented many of the things 25 which followed; is that fair? 69 1 A. I'm afraid that is correct, sir. 2 SIR WYN WILLIAMS: Yes, all right. 3 MS PRICE: Just following on from the Chair's question, 4 then, at paragraph 61 of your second statement, you 5 acknowledge that, by not reading counsel's advice and 6 the expert's opinion, there was a missed opportunity. 7 A. I do. 8 Q. Can you recall at all the level of settlement which you 9 approved? 10 A. I couldn't but I think it was about £180,000-odd. 11 Q. Do you have an independent recollection of that now? 12 A. No. 13 Q. We've seen reference to a number of figures in the 14 paperwork so that's why I ask, just to be clear. Can 15 you recall at all -- 16 A. If I had been asked, I would have said it was under 150 17 but, you know, I'm -- I've now seen quite a few numbers. 18 Q. Did you draw this case to the attention of the Post 19 Office Limited Board at any point? 20 A. No. Could I just say why? 21 Q. Of course. 22 A. Because this was in Peter Corbett's line of command and 23 the only reason he wasn't -- hadn't been dealing with it 24 was that he was on holiday and I would have expected 25 Peter to discuss this at Board level. 70 1 Q. Even based on the limited information that you say you 2 had access to at the time, do you think you should have 3 referred it to the attention of the Board, 4 notwithstanding Peter Corbett's area of responsibility? 5 A. I probably should but, before that, I should have put 6 a stop to it by saying, you know, "This has got to be 7 reviewed properly". 8 Q. Could we have on screen, please, POL00095506. This is 9 a Post Office Limited Board status report relating to 10 actions from the Post Office Limited Board meeting on 11 13 October 2004. Looking, please, to page 4 there is 12 an action for you, 21, "Civil Orders". Just before we 13 look at the detail of that, what was the purpose of 14 these Board status reports? 15 A. To keep people up to date with where we were and to 16 remind people that they had actions that needed to be 17 fulfilled by the next board, or whenever sorry. 18 Q. Looking at the action under "Civil Orders", the action 19 is: 20 "Where fraud has been perpetrated against the 21 company, ensure that the appropriate civil orders were 22 being used immediately in advance of any criminal 23 proceedings." 24 The status is record on the right-hand side of the 25 page: 71 1 "I have received a report about the way we apply 2 Civil Orders as of now and am concerned that we are not 3 properly exploiting the 2002 Proceeds of Crime Act. 4 I have asked, therefore, for a speedy update of our 5 procedures to do just that." 6 It appears from this document and the Board meeting 7 minutes to which this action relates that you were 8 leading on this item; is that right? 9 A. Certainly, I was asked by the Board to see what was 10 happening in this area. 11 Q. Were these your words, "I have received a report"; is 12 this is an entry by you? 13 A. I can't remember but it's there, isn't it? 14 Q. Can you tell recall at all what the basis for the 15 conclusion that Post Office Limited should be properly 16 exploiting the 2002 Act -- 17 A. I'm afraid I can't. 18 Q. -- was? 19 Could we have on screen, please, POL00021486. These 20 are the December 2004 POL Board meeting minutes. You 21 are present in the list and, going to page 2, please, we 22 can see the issue of Civil Orders here, "Action: David 23 Miller", under (f) and the minutes say this: 24 "In the event of fraud against the company, David 25 Miller would ensure that the pensions of fraudsters were 72 1 targeted to help ensure the company was reimbursed." 2 Was this a proposal that you made to the Board, this 3 particular reference to targeting the pensions of 4 fraudsters or was this something that was proposed by 5 someone else? 6 A. There was something that was proposed by somebody else. 7 I mean, I don't recall this in any detail at all. But 8 I certainly didn't propose that. 9 Q. What was your view on that? 10 A. Well, seeing it here, it sounds horrendous. Sorry, it 11 sounds severe, in terms of its intention. 12 Q. At the time, did you associate fraud and the commission 13 of it with shortfall cases involving subpostmasters? 14 A. I don't know. Sorry. 15 Q. This was less than six months after you signed off on 16 the Wolstenholme settlement and you had, earlier in that 17 year or in the course of 2004, been made aware of other 18 subpostmasters raising issues about the Horizon system. 19 Did it occur to you at any time that this might be 20 relevant to decisions about recovery in fraud cases? 21 A. I didn't make the direct connection, no. 22 Q. Could we have on screen, please, paragraph 16 of 23 Mr Miller's second statement, that's page 5. You say 24 here: 25 "... I was aware that [Post Office Limited] would, 73 1 from time to time, pursue postmasters for the recovery 2 of alleged shortfalls branch accounts, including through 3 civil proceedings, but again I did not know any of the 4 detail and was not involved in the oversight of such 5 action." 6 Does the knowledge of your involvement in the 7 actions relating to civil orders in fraud cases at Board 8 level change your evidence at all in terms of your 9 involvement of oversight? 10 A. Well, I don't think I could be so absolute in saying 11 I did not know any of the detail. 12 Q. Could we have on screen, please, POL00107426, and page 3 13 of this document, please. This is an email from Mandy 14 Talbot to a number of recipients, including David X 15 Smith, that is IT Director David Smith. It is dated 16 23 November 2005. It relates to a civil claim which had 17 been brought by the Post Office against Lee Castleton 18 for £27,000, which had led to a counter claim limited to 19 £250,000, given the summary in this email. First of 20 all, were you aware of the Castleton case at time that 21 you were in director roles? 22 A. I'm sorry, I'm having to think because, clearly, I've 23 read and seen an awful lot about it. I'm not -- I do 24 not recall it in any detail at the time. I may have 25 heard the name but the details of the case, I don't 74 1 think I was involved in. 2 Q. The first paragraph of the email reads as follows: 3 "Proceedings have been issued ... against Lee 4 Castleton, the former postmaster at Marine Drive for 5 [£27,000]. It was known by the business prior to issue 6 that Lee Castleton blamed Horizon for the losses. 7 External solicitors were asked to check with the Fujitsu 8 liaison team and to assure themselves that the evidence 9 in respect of for Horizon was sound before the issue of 10 proceedings. There had been no security investigation 11 so the data had not been requested from Fujitsu." 12 Then two paragraphs down: 13 "As part of the claim the solicitors for [Lee 14 Castleton] have stated in the allocation questionnaire 15 that they intend to call evidence from other existing 16 and former postmasters about the problems with the 17 Horizon system. They have also asked for disclosure of 18 data about all calls or complaints logged from 19 postmasters about the Horizon system, presumably from 20 the inception of the system. They have called for 21 disclosure of all documents removed from the branch 22 office during the investigation. There is an issue over 23 locating all these documents." 24 This email also covers Mr Bajaj's case, towards the 25 bottom of the page, and it explains that he was 75 1 a Torquay branch office postmaster: 2 "... who is challenging the validity of data 3 supplied by the Horizon system on which errors have been 4 raised against his branch office. He has not been able 5 to explain the losses and has been required to make good 6 the losses by way of deduction from remuneration. No 7 proceedings have been issued but the matter is in the 8 hands of external solicitors. 9 "[He] has taken the step of writing an article in 10 the SubPostmaster November 2005 edition, seeking [over 11 another page, that's blank] information from other 12 postmasters in a similar situation. His solicitors say 13 that they have been contacted by other postmasters and 14 that a class action is possible unless, the reductions 15 from remuneration are refunded. They also make 16 a reference to what we assume is the Castleton case." 17 Under that there are some issues which are set out: 18 "In each case the postmasters are challenging the 19 validity of data provided by the Horizon system ... 20 "If the challenge is not met the ability of POL to 21 rely on Horizon for data will be compromised and the 22 future prosperity of the network compromised. 23 "Fujitsu's reputation will be affected." 24 There are a number of suggestions set out beneath 25 that, which I don't intend to take you to in detail. 76 1 You were not a recipient of this email but David Smith 2 was. This email and the suggestions underneath appear 3 to have led to a meeting about Horizon integrity in 4 December 2005. 5 Could we have on screen, please, POL00119895. These 6 are the minutes from that meeting, which took place on 7 6 December 2005. We can see Keith Baines was present 8 along with Mandy Talbot and Graham Ward among others. 9 The first point under "Findings" is this: 10 "There is no generally understood process for 11 identifying emerging cases in which the integrity of 12 accounting information produced by Horizon may become 13 an issue." 14 Then under "Recommendations" page 3, please, 15 recommendation number 1 is that: 16 "A coordination role should be established to 17 maintain a list of all current civil cases and potential 18 civil cases where accuracy of Horizon accounting 19 information may be an issue, and ensure that all 20 relevant business functions are made aware of these 21 cases." 22 Under "Specific Action Points", that's page 5, 23 please, this is the sixth of those specific actions: 24 "KB [Keith Baines] -- to brief Dave Smith on the 25 meeting's recommendations." 77 1 Were you aware of this meeting to discuss Horizon 2 integrity in December 2005? 3 A. No. 4 Q. Did anyone report the findings and recommendations to 5 the board, as far as you are aware? 6 A. Not as far as I was aware. 7 Q. Did David Smith -- that is IT Director David Smith -- 8 ever raise this with you? 9 A. No, but, at this time, David Smith was not IT Director; 10 he was in the IT Department working to Ric Francis. 11 Q. Did Ric Francis ever raise -- 12 A. No. 13 Q. -- this meeting or what was discussed at it with you? 14 A. No. I had -- in my Department, there was one 15 representative, which was John Legg, who worked for Mike 16 Granville, who worked for me, and nothing came up that 17 line about this. 18 Q. Going, please, to January 2006 and your involvement in 19 the development of Horizon Online, you address this at 20 paragraph 64 of your second statement. Could we have 21 that on screen, please. It's page 15. 22 You discuss in this paragraph some discussions that 23 you were involved in, although that first document you 24 say was sent when you were on sick leave. Then you go 25 on at the bottom -- 78 1 A. That was -- sorry, just if I can make a point about the 2 dates, that was March 2001, and there was 3 an understanding that the Horizon system would stop in 4 2005, and we had to do some serious thinking and 5 planning about what we were going to do beyond that. So 6 I had discussed that with David Smith and others. I was 7 on sick leave at the time that went in but I would have 8 been aware of what was in that document. 9 Q. You, at the bottom of that page, say: 10 "My involvement in the development of Horizon Online 11 was in 2006 when acting MD for a couple of months in 12 between David Mills and Alan Cook. I also signed off 13 the document [and the reference is there] which was 14 prepared for me by Ric Francis the IT Director and his 15 team who were developing Horizon Online." 16 Could we have the document you signed off on screen, 17 please. It is RMG00000041. Going to the bottom of 18 page 2, please. We can see your name and January 2006 19 is the date. Going back to page 1, please. Under 20 "Background", there is this: 21 "It is essential that Post Office Limited achieves 22 significant reductions in IT costs if it is to return 23 the business to sustainable profitability. The major 24 opportunity to do this resides with the Horizon system 25 that is provided by Fujitsu Services under a contract 79 1 that runs through to March 2010. 2 "Fujitsu Services proposed a major investment in 3 application, branch and data centre hardware which would 4 simplify the solution enabling significant reductions in 5 recurring operating costs on the basis that the term of 6 the existing contract was extended to March 2015. 7 However, this proposition gave a gentle upward increase 8 in operating costs once the benefits of the upfront 9 investment had been realised. 10 "Post Office Limited concluded that if it was to 11 achieve a contract that delivered year on year cost 12 reductions then it would need to contract on a radically 13 different basis. Post Office Limited has negotiated the 14 basis of a deal with Fujitsu that closely mirrors what 15 it believes would be achievable by going to open 16 market." 17 Then under "Options", on page 2, please: 18 "There are a number of options which include do 19 nothing and wait to [complete] the contract at the end 20 of the current term. None of these options generate the 21 savings required within the necessary timescale. 22 "Termination of the existing contract, at a cost of 23 circa £80 million, would enable disaggregation of the 24 services in order to procure from best of breed." 25 Can you help with what is meant by "best of breed"? 80 1 A. Just best available to the market. 2 Q. Ie alternatives to -- 3 A. Yes. 4 Q. -- Fujitsu, potentially? Okay: 5 "This might deliver lower steady state costs. 6 However, this would be at considerably increased risk 7 and take longer to deliver." 8 Then we have: 9 "The Gartner Group have benchmarked proposals from 10 Fujitsu which has enabled Post Office Limited to form 11 a view of what it might expect to achieve by going to 12 the market. Post Office Limited firmly believe that the 13 speculative additional savings that might be achieved 14 through open competition do not the increased risk." 15 Then under "Risk", there is acknowledgement here 16 that there are risks around time, cost and quality with 17 any major IT investment: 18 "Post Office Limited and Fujitsu Services have now 19 delivered ten major releases of software to time cost 20 and quality. Cost reduction will require investment and 21 doing this through the existing relationship presents 22 the least risk route. Additionally a series of caps and 23 collars are in place that limits Post Office Limited's 24 exposure to cost overruns. 25 "The risk that Post Office would achieve greater 81 1 savings through open competition is mitigated through 2 Post Office Limited's right to market test unbundled 3 components of the contract. This market testing could 4 enable the Post Office to [complete] all of the existing 5 contract over a period of time. 6 "Current Position 7 "All the major principle areas necessary for a deal 8 have been agreed with Fujitsu and these have been 9 endorsed at Chief Executive level. Detailed terms will 10 be in place by March ... The intention is to go to the 11 February Post Office Limited Board and the March Royal 12 Mail Holdings Board to seek formal approval for the 13 contract and associated investments." 14 The "Recommendation" is for the Board to note the 15 progress. 16 At the time you signed off this paper, were you 17 aware of any review or audit conducted by the Post 18 Office or any independent contractor of the 19 effectiveness and reliability of Legacy Horizon? 20 A. No. 21 Q. This was relevant, wasn't it to whether further 22 investment in the Fujitsu platform would be a good 23 business decision for the Post Office? 24 A. Yes, except that the aim, I think, of this was to move 25 on beyond Legacy, seeking improvements on many fronts. 82 1 Q. There is a focus in this paper on the saving costs in 2 Horizon. How were you satisfied that Fujitsu could be 3 made to produce the same or similar service more 4 cheaply? 5 A. I wasn't at that stage. I mean, I think work had been 6 done by Ric Francis particularly and there are 7 comparisons with -- by a company called Gartner who 8 compare IT systems systematically, so a lot of work had 9 been done in that area. 10 Q. Given the reports to you of problems experienced by 11 subpostmasters with Horizon that we've been through this 12 morning, as well as your experience of problems with the 13 rollout of Legacy Horizon, did you have any concerns 14 about the proposal to stay with Fujitsu? 15 A. I think it was discussed, not at length but discussed 16 briefly. 17 I think the view was that going elsewhere could 18 cause significant dislocation problems and I think Ric 19 and his team looked pretty closely at what we could and 20 couldn't do, and the view was we needed to put Fujitsu 21 under pressure, I think, to come forward with a better 22 deal, based on improved technology. 23 Q. Could we have on screen, please, POL00081928. Going to 24 page 6, please, scrolling down a little, this is 25 an email from Anne Chambers dated 23 February 2006. The 83 1 subject is "Callendar Square", and the second paragraph 2 of this email -- I should clarify this is to Mike 3 Stewart; you're not on this email chain? 4 A. No, this is Fujitsu. 5 Q. Yes. But it is just a question as to whether or not you 6 were aware of something in this email. The second 7 paragraph says: 8 "Haven't looked at the recent evidence, but I know 9 in the past this site had hit this Riposte lock problem 10 2 or 3 times within a few weeks. This problem has been 11 around for years and affects a number of sites most 12 weeks, and finally Escher say they have done something 13 about it. I am interested in whether they really have 14 fixed it, which is why I left the call open -- to remind 15 me to check over the whole estate once S90 is live -- 16 call me cynical but I do not just accept a 3rd party's 17 word that they have fixed something!" 18 Had you ever heard of any issues at the Callendar 19 Square branch? 20 A. No. 21 Q. Going to page 5 of this document, please. The email 22 from Gary Blackburn, dated 1 March. This is to Shaun 23 Turner, at the Post Office. 24 "Shaun 25 "It appears that Callendar Square is not alone with 84 1 its mismatch problem. It also appears that Fujitsu are 2 expecting S90 release to resolve this quirk. 3 "We have opened a cross domain problem [report] ..." 4 Q. It appears from these release emails that S90 was 5 expected to resolve the Callendar Square problem; would 6 you agree with that? 7 A. That's what it says. 8 Q. Could we have on screen, please, POL00032210. These are 9 the Post Office Board minutes from 20 April 2006. Can 10 we go to page 10, please. Apologies, before we go to 11 page 10, just going back to page 1, please. We can see 12 that you were present at that meeting and, going to 13 page 10, please, we can see there is an operations 14 report about halfway down the page. That covers the 15 Horizon S90 release and it said at (b)(iv) that this 16 would: 17 "provide for a plethora of change requests across 18 a variety of existing capabilities." 19 What do you understand that to be saying? Did that 20 mean anything to you at the time? 21 A. Well, that it was sweeping up a number of issues that 22 should be sorted out by that release. 23 Q. Did you have any awareness that the S90 release was 24 intended to fix the Callendar Square problem? 25 A. No. 85 1 Q. I'd like to turn, please, briefly, to the relationship 2 between the reliability of Horizon and the accuracy of 3 the company accounts. The Horizon system recorded 4 transactions for the business and the accounts for the 5 business were compiled based on the transactions 6 recorded by the Horizon system. We've seen already the 7 Ernst & Young letter to you, way back in August 1999. 8 Would you agree that the board had to satisfy itself 9 that the Horizon data could be relied upon, otherwise it 10 couldn't be satisfied that the accounts were correct? 11 A. It had to satisfy itself that all data -- but I suspect 12 that there was -- 13 Q. That the Horizon data produced -- 14 A. Yeah, including Horizon but I suspect, in terms of the 15 accounts, there was some materiality here. 16 Q. Could we have on screen, please, POL00178249. This is 17 described as the March 2004 "Post Office Limited Horizon 18 Electronic Cash Account Review" and, scrolling down 19 a little, please, it's from Ernst & Young, the external 20 auditors and it's sent, "For Information", to David 21 Mills, Peter Corbett, you, Vicky Noble, Sue Harding, 22 Alan Barrie, Sue Lowther, Rod Ismay and Derek Foster. 23 Just going to page 2, please, the second paragraph. 24 There is a background here set out: 25 "On an annual basis, to support Ernst & Young in 86 1 their review of Post Office's financial statements, 2 IA&RM ..." 3 Can you help with who that is? 4 A. I can't, I'm afraid. 5 Q. "... undertake a review of the Horizon system electronic 6 cash account and the system interfaces to CBDB. The 7 purpose of the review is to provide assurance on the 8 effectiveness of the controls over the Horizon 9 electronic cash account and the integrity of the data 10 held on the Horizon and CBDB systems. In accordance 11 with the terms of reference, the review covered all 12 transactions undertaken by Great Moor post office for 13 cash account week 35, 2003/2004." 14 Do you recall this work being done or being aware of 15 it? 16 A. No. 17 Q. Based on that paragraph and a quick skim of the report, 18 it appears that the analysis was done by reference only 19 to one Post Office branch; is that right? 20 A. So it appears, yes. 21 Q. There is an equivalent report for March 2005. There's 22 no need to turn that up, but the reference for the 23 transcript is POL00178583. I think you've been provided 24 a copy of that quite recently, as well; is that right? 25 A. Yes, that's correct. 87 1 Q. Would you agree that, likewise in that report, the 2 analysis seems to be done by reference to one Post 3 Office branch? 4 A. Yes. 5 Q. Do you recall having any awareness of any kind of 6 monitoring work like this being done in relation to the 7 accounts? 8 A. I was aware that the auditors were undertaking this 9 work. At the time, I wasn't aware of the scale of it, 10 I have to say. I should have been but I wasn't. 11 Q. Being aware of the scale of it now, do you consider it 12 was a satisfactory way for the Board to satisfy itself 13 of the accuracy of the company accounts? 14 A. It was very limited. 15 Q. Just, finally, at paragraphs 23 and 37 -- perhaps if we 16 can start with paragraph 23 of your second statement, 17 that's page 7, you say: 18 "I do not recall the POL Board having oversight of 19 criminal prosecutions -- this was dealt with by the 20 Security and Legal Departments (who were part of Group). 21 In hindsight, this seems to be a significant oversight 22 by the Board." 23 Then paragraph 37, please. You say: 24 "POL's corporate structure seemed to me to be 25 adequate at the time. However, in retrospect, I have 88 1 concerns about the degree of autonomy enjoyed by 2 Security and Legal and the like of POL oversight." 3 What do you consider was the cause or the omission 4 or lack in the governance structure that led to this 5 lack of oversight? 6 A. Well, subsequently, Post Office Limited has its own 7 Legal Department, its own Security Department, as 8 I understand it, and I think there was, during the years 9 we are talking about, some reorganisation, and then very 10 fast reorganisation after that, and I think there was 11 some organisation issues that led to problems. And 12 I think the Group control of Legal and parts of Security 13 meant that Post Office Limited didn't have sufficient 14 oversight of matters that should have been within its 15 remit. 16 Q. You may be aware that Alan Cook, who gave evidence to 17 the Inquiry last week, his position was that he did not 18 appreciate that Post Office were conducting private 19 prosecutions of SPMs until 2009. What do you make of 20 that? 21 A. I'm surprised he wasn't told. 22 Q. You were the temporary MD for two to three months before 23 he took up the role and you handed over to him when he 24 arrived. Do you think you bore any responsibility for 25 drawing that to his attention or not? 89 1 A. Probably. 2 MS PRICE: Sir, those are my questions. It is now 1.00. 3 I'm not sure whether Core Participants have questions or 4 not. I think there are. There are at least two, 5 possibly three, sets of Core Participants who have some 6 questions. Is now a convenient time to break for lunch? 7 SIR WYN WILLIAMS: Yes, it is, I think, not least because 8 the transcriber should have a break. So we will break 9 until 2.00? 10 MS PRICE: Thank you, sir. 11 (1.00 pm) 12 (The Short Adjournment) 13 (2.00 pm) 14 MS PRICE: Good afternoon, sir, can you still see and hear 15 us? 16 SIR WYN WILLIAMS: Yes, I can. 17 MS PRICE: Mr Stein, Mr Moloney and Ms Page have some 18 questions. They estimate they will be no more than 15 19 minutes altogether, and they are going in that order, if 20 that's all right, sir. 21 SIR WYN WILLIAMS: Of course, and I'm smiling only because 22 of the flexibility of these timings. 23 MR STEIN: Sir, thank you. 24 Questioned by MR STEIN 25 MR STEIN: Mr Miller, I have a few questions for you. My 90 1 name -- 2 Let me try that, again. My name is Sam Stein, 3 I represent a large number of subpostmasters/mistresses 4 and, indeed, people that are employed within Post Office 5 branches. 6 Now, you've said at the beginning of your evidence 7 today, Mr Miller, that you wanted to correct your 8 statement and you wanted to correct your statement 9 regarding paragraph 51. 10 Paragraph 51 of your statement, page 12, says you 11 had no involvement with the design and implementation of 12 the IMPACT Programme. Your correction was to say that 13 you've seen documents that tell you that you are -- were 14 involved, sorry, as part of the IMPACT Programme; is 15 that correct? 16 A. Yes. 17 Q. All right. Now, the IMPACT Programme was running, in 18 terms of design, from 2003 and implementation came along 19 in 2006, okay? 20 A. (The witness nodded) 21 Q. All right. Now, do you recall that, as part of the 22 IMPACT Programme, the ability for subpostmasters to put 23 monies in suspense, in other words into dispute, was 24 removed? 25 A. Yes, I do, sorry. 91 1 Q. Right. Now, did you understand at the time that the 2 reason why subpostmasters would be wanting to put money 3 into suspense, in other words into dispute, was because 4 they were suggesting that they were not at fault for the 5 shortfall. Did you understand that at the time? 6 A. I understood that in some cases, Mr Stein, yes. 7 Q. Right. So why was it removed, Mr Miller? 8 A. I think there was an overriding view in the business 9 that they wanted to get an accounting system in that 10 didn't allow for the effect of the suspense account 11 previously. 12 Q. Right. Are you trying to say that it was removed 13 because you didn't want subpostmasters and mistresses to 14 dispute shortfalls? 15 A. No. 16 Q. Right. Well, that's the effect of it, Mr Miller. Try 17 it again. Why was the suspense account removed? 18 A. Um, right -- there was a view that, previously, the 19 suspense account had been used for all sorts of things 20 and that, in the future, they wanted it a lot -- or we 21 wanted it, I'm sorry, a lot cleaner. But I am not sure 22 that the precise impact of what you are asking me about 23 was fully comprehended. 24 Q. Right. Was one of the all sorts of things that the 25 suspense account was used for where the subpostmaster 92 1 was disputing their fault? Was that one of the things? 2 A. Yes. 3 Q. Right. If you remove the suspense account, does that 4 take away from the ability of a subpostmaster to dispute 5 the shortfall? 6 A. No, I don't think it did. 7 Q. Right. What facility did they then have after the 8 suspense account was removed to dispute it? 9 A. Well, sorry, they could -- there were discussions with 10 the Retail Line and others about what was appropriate. 11 Q. Right. If you accept that one of the reasons for 12 putting money into suspense is because a subpostmaster 13 is disputing that shortfall -- yes -- 14 A. Yes. 15 Q. -- you accept that, which you do -- and then you remove 16 that ability, does that help the subpostmaster dispute 17 the shortfalls? 18 A. No, it doesn't. 19 Q. Right. Now, think about this slightly further and I'll 20 move on. If a postmaster is stopped from disputing 21 shortfalls, what does that do to the reporting of system 22 problems? Does it help it? 23 A. I'm not sure how it affects it, I'm sorry. 24 Q. Well, as an example, does it stop the person saying, 25 "Look there's a problem with your system, maybe do 93 1 something about it"? Do you think that helps it? 2 A. No, I would dispute that it stopped it. 3 Q. All right, let's move on. You say at paragraph 55 of 4 your statement that "Tony Marsh worked for the Group 5 Security Director with a dotted line to me", okay? Was 6 there a dotted line from Tony Marsh, the Group Security 7 Director, to anyone else on the Board? 8 A. No. 9 Q. Right. So Tony Marsh reported to you; is that correct? 10 A. Technically, he reported to the Group Security Director, 11 who did his appraisement (sic) every year and, within 12 Post Office Limited, he had a dotted line to me. 13 Q. Sort did the Group's Security Director report to you? 14 A. No. 15 Q. Right. So why do you say "There was a dotted line to 16 me"? What was the dotted line about? 17 A. It was an organisational effect that said, actually, 18 Tony may work for Group but he has to have some 19 anchorage in Post Office Limited and we'll anchor him 20 here. 21 Q. Right, you've spoken about the Coyne report. Do you 22 remember the questions being asked earlier on today by 23 Ms Price, yes? 24 A. Yes. 25 Q. You've said about the Coyne Report -- this is in your 94 1 evidence today -- that, in relation to the expert's 2 opinion, at the time there was a lot of knocking of that 3 report, both Fujitsu and Post Office, okay? So your 4 evidence seems to be that, regarding the Coyne Report, 5 there was knocking it of it by Fujitsu and Post Office. 6 So let's take it in turn. What knocking of the Coyne 7 Report was there by Fujitsu? 8 A. I saw the Inquiry question Jan Holmes, who is a senior 9 auditor. There was a considerable discussion about his 10 view of this report and the discussion went to some 11 lengths about what his view of it was and whether that 12 was correct. 13 Q. At the time, when you were dealing with the Coyne Report 14 and discussing it with Mr Marsh, was the knocking from 15 Post Office via Mr Marsh about the Coyne Report? 16 A. There was a background noise from my company, Post 17 Office Limited, that was basically saying this is not 18 a good report, this is not a sound report. 19 Q. Who did that background noise come from? 20 A. It came from a variety of places. 21 Q. Well, name one? 22 A. Well, certainly when Tony spoke to me on the day that we 23 have talked about earlier today, he was dismissive of 24 that report but there were, I suspect, back in the 25 bowels, as it were, of the organisation, there was 95 1 significant people saying this is no good. 2 Q. You suspect. Now, Mr Miller some parts of your evidence 3 it appears as though you're speaking from a kind of 4 a distance, like an out-of-body experience. What do you 5 mean you suspect that there was some talk within Post 6 Office about it; was there or was there not? 7 A. Yes. 8 Q. Right, from who? 9 A. I know -- I heard from Tony Marsh. I really don't know 10 who else was saying these things. I'm afraid I don't, 11 I'm sorry. 12 Q. Okay. You've also said this, both in your statement and 13 in your evidence: you definitely did not read the report 14 at the time. That's your evidence about it? 15 A. It is. 16 Q. So are we to understand that you can think back to the 17 time when you've got Mr Marsh in front of you and he is 18 referring to the report, are you saying that you can say 19 in your own mind from your recollection, "No, thanks, 20 Mr Marsh, I won't read it. It's okay, no problems"? 21 A. No, I didn't say that. 22 Q. Right, why are you saying you definitely didn't read it? 23 Do you remember not reading it? 24 A. I -- when I read it, when it was made available to me 25 for the second time via this Inquiry, I had not read 96 1 that. 2 Q. So Mr Marsh comes to you with a report that he's 3 knocking, that you're hearing something going on in the 4 background about from the Post Office knocking this 5 report, and you decide not to read it? Is that what 6 you're saying, Mr Miller? 7 A. I didn't read it. I had made that very clear to this 8 Inquiry, that I didn't read it, and it's a matter of 9 some regret to me. 10 Q. Mr Miller, one of two things arise out of that, you're 11 either lying through your teeth or you're a complete 12 incompetent, which? 13 A. I'm not lying through my teeth. 14 Q. Right, so incompetence? 15 A. If you wish to say that, yes. 16 Q. Do you agree it is incompetent not to have read a report 17 in these circumstances? 18 A. I'm not happy that I didn't read that report. 19 Q. Paragraph 16 of your statement, similar to paragraph 15, 20 you refer to the fact that POL would, from time to time, 21 pursue postmasters for the recovery of alleged shortfall 22 branch accounts including through civil proceedings, 23 yes? Regarding the Coyne Report, you agree, I believe, 24 that you signed off the settlement in relation to the 25 matter that was under discussion; is that right? 97 1 A. I did. 2 Q. Okay. So do you agree you were the person in charge of 3 the final decisions in relation to such matters as civil 4 actions being taken against subpostmasters at that time? 5 A. No. 6 Q. Who else was Mr Marsh going to, then, when discussing 7 the Coyne Report -- 8 A. If Peter Corbett, the Finance Director, had not been on 9 holiday, he would have gone to him, or -- I mean, 10 Peter -- that was in Peter's line and Peter was due to 11 sign that off. He was on holiday. 12 Q. Right. Peter reported to? 13 A. The managing Director. 14 Q. Right. So, on this particular occasion, on the only one 15 occasion when Mr Marsh is coming to you because 16 Mr Corbett is away, you decide not to read a report that 17 Mr Marsh is referring to in disparaging terms and you 18 just sign it off; is that correct? 19 A. I did. 20 Q. Mr Miller, how much did you earn during your period of 21 time; what was your annual wage? 22 A. That can be made available. 23 Q. What was it, Mr Miller? 24 A. I don't know. 25 Q. Bonuses, did you get bonuses? 98 1 A. I got bonuses. 2 Q. Were they significant sums? 3 A. Some were. 4 MR STEIN: Thank you. 5 SIR WYN WILLIAMS: Is that it, Mr Stein? 6 Yes, Mr Moloney. 7 Questioned by MR MOLONEY 8 MR MOLONEY: I'm grateful for your observation of fluidity 9 of time estimates. It's now 2.12 and I anticipated that 10 Mr Stein was only going to be five minutes but I'll try 11 to be short and not keep too long. 12 Mr Miller, I've in fact been referred to during the 13 course of your evidence this morning, as somebody who 14 asked you questions on the last time you attended. My 15 name is Moloney. It's agreed with Ms Price that it 16 might be useful just to clear up any uncertainty about 17 the evidence you gave when you first appeared before the 18 Inquiry when I asked you questions. 19 I'll just take a minute on that, if I may, just to 20 set the scene. When you gave evidence to the Board in 21 July 1999, you had been aware of the cash account 22 problems, yes? 23 A. Yes. 24 Q. You'd also been aware from the NFSP meeting in June 1999 25 of the postmasters' serious problems with Horizon, 99 1 especially around balancing, that was affecting their 2 physical and mental wellbeing? 3 A. I'm aware. 4 Q. Yes. But at the Board, despite those difficulties of 5 which you were aware, the minutes suggest that you said 6 that Horizon was robust and fit for purpose? 7 A. I said that also, subsequently, there was discussion, 8 and this didn't come out this morning, there was 9 discussion of other issues related and that is minuted 10 in those Board minutes. 11 Q. After -- and I asked -- you said at the time that you 12 couldn't remember saying that, that's what you said to 13 Mr Blake, and I asked you if you had any reason to doubt 14 the accuracy of those minutes and you said you didn't 15 and you clarified that you definitely did not say that 16 Horizon was not fit for purpose and not robust. But you 17 later on, after that meeting, found out about the Ernst 18 & Young letter on audit integrity and various other 19 matters and you said that you should have looped around 20 to the Board, bypassing Mr Sweetman, whose 21 responsibility you thought it was to inform the Board of 22 those things? 23 A. I think there was some discussion of that. I can't 24 recall saying precisely that, Mr Moloney. 25 Q. Okay. Today, in answer to questions from Ms Price, you 100 1 said that: 2 "On overall reflection, I should have told the 3 lawyers and IT that Horizon was a new system coming in, 4 and they should be very cautious about evidence coming 5 out of that system." 6 A. That they should check the evidence coming out of that 7 system. 8 Q. Yes. Then, subsequent to the board meeting, we've seen 9 this morning that you were involved in Mr Andrews' case, 10 Horizon outages, and you had some involvement in the 11 Cleveleys case. 12 You were taken to the Board minutes of December 2004 13 and you were tasked to ensure that Post Office could 14 recover the pensions of fraudsters, yes? 15 A. I was tasked with that. I made some comment on that, 16 but -- 17 Q. Yeah, somebody else on the Board had raised this, you 18 say. 19 A. Yes. 20 Q. Was this is an opportunity, given that those fraudsters 21 were subpostmasters, for you to raise your concerns that 22 Horizon was a new system coming in and everybody should 23 be very cautious about the evidence that came out of 24 that system? 25 A. Had I known what I now know, the answer would be yes. 101 1 Q. Finally, if I may, Mr Miller, could I ask that the 2 October Board minutes that we've been to before, which 3 are POL00095506, are put up. Could we go to page 4, 4 please. We see there, if we could just -- it's at 22, 5 NFSP subsidy, this may be sufficient: 6 "Reconsider the subsidy provided to the NFSP if they 7 continue to undermine the position of Post Office 8 Limited." 9 This a Board meeting at which you were present and 10 the specific action was: 11 "... to assess competing financial services products 12 and to communicate that these would not be covered by 13 our compliance and AML training [that's anti-money 14 laundering training]. The latter has been done by focus 15 communications and an article will be appearing in The 16 SubPostmaster. A list of competing products is being 17 compiled. Considering the continuation of the NFSP 18 subsidy will be undertaken in the light of overall 19 developments and information gathered covering (eg 20 including travel)." 21 Do you remember this issue at all, Mr Miller? 22 A. I do. 23 Q. Was this that there'd been an NFSP meeting where there'd 24 been a stall at that meeting, with, as it were, a rival 25 firm -- 102 1 A. That's correct. 2 Q. -- for financial services. Yes. Was Post Office 3 conscious that its subsidy of NFSP could be taken away 4 if the NFSP undermined it? 5 A. Was it -- did it know it could do that? 6 Q. Yeah. 7 A. I think so. 8 Q. Was it conscious that this might be leverage with the 9 NFSP? 10 A. I'm sure it was. 11 Q. Yeah, which is why the specific action was to assess 12 competing financial services products and to 13 communicate, presumably to the NFSP, that these would 14 not be covered by our compliance and AML training. Did 15 you consider that that consciousness and what's being 16 portrayed here was a healthy attitude from the business 17 to an association which was supposed to represent the 18 interests of postmasters? 19 A. No. 20 Q. Presumably, especially not those postmasters who were 21 the subject of civil debt recovery proceedings? 22 A. No. 23 Q. Nor, indeed, those postmasters who were the subject of 24 criminal proceedings and asset recovery to the extent of 25 their pensions being taken? 103 1 A. Yes. 2 MR MOLONEY: Thank you, Mr Miller. 3 SIR WYN WILLIAMS: Ms Page? 4 Questioned by MS PAGE 5 MS PAGE: Thank you sir, very briefly. 6 Mr Miller, on the Programme Board for IMPACT, you 7 sat as what was called a senior user, didn't you? 8 A. Yes. 9 Q. The programme was intended to "leverage and simplify the 10 technology landscape". That means, in effect, that it 11 was an extension of Horizon, doesn't it? 12 A. Or Horizon was an extension of it. Yes, it was part of 13 the overall infrastructure. 14 Q. So it was built into and onto and around the existing 15 Horizon infrastructure, yes? 16 A. Yes. 17 Q. Did you ever think to make sure that the people involved 18 with it had read Jeremy Folkes' document to you about 19 the problems with Horizon and the things to look out 20 for? 21 A. I didn't. 22 Q. Why not? 23 A. I just didn't. 24 Q. Is the -- 25 A. I'm not saying I shouldn't have done but I didn't. 104 1 Q. Is the real issue here with some of the points that you 2 have very fairly recognised you should have done, or you 3 might have done differently, is the real issue here that 4 you and Post Office Board were keen to forget or deny 5 the problems with Horizon as soon as you could? 6 A. No. 7 MS PAGE: Thank you, sir. Those are my questions. 8 SIR WYN WILLIAMS: Thank you, Ms Page. Is that it, 9 Ms Price? 10 MS PRICE: Yes, it is, sir. 11 SIR WYN WILLIAMS: Right. 12 MS PRICE: If you're content, sir, the plan would be to move 13 directly Mr Mills' evidence once Mr Miller is completed, 14 subject to any questions from you. 15 SIR WYN WILLIAMS: No, I've asked the few questions that 16 I have as we've been going along. 17 So thank you, Mr Miller, for making yourself 18 available, both by writing the second witness statement, 19 and by coming today for the second time. I'm grateful 20 to you for participating in this way in the Inquiry. 21 THE WITNESS: Thank you, sir. 22 SIR WYN WILLIAMS: Right. I'll just disappear from the 23 screen momentarily, Ms Price, while I get my hard copy 24 of the next witness's evidence all right? 25 MS PRICE: Thank you, sir. 105 1 MR STEVENS: Good afternoon, sir. Can you see and hear us? 2 SIR WYN WILLIAMS: Yes. 3 MR STEVENS: May I call Mr Mills? 4 SIR WYN WILLIAMS: Yes, of course. 5 DAVID JOHN MILLS (sworn) 6 Questioned by MR STEVENS 7 MR STEVENS: Thank you, Mr Mills. Please could I ask you to 8 state your full name. 9 A. David John Mills. 10 Q. Thank you for giving evidence to the Inquiry today. You 11 should have in front of you a witness statement dated 12 8 March 2024 and running to 141 paragraphs. Do you have 13 that? 14 A. I do. 15 Q. For the record, the witness reference number is 16 WITN10950100. Before we turn to your signature, 17 Mr Mills, I understand there's one small correction you 18 would like to make? 19 A. Yes, please. 20 Q. It's at page 8 of the statement, paragraph 24 and it's 21 in respect of the second sentence: 22 "Thereafter the meetings occurred on a monthly basis 23 until I left POL [Post Office Limited] in 2006." 24 A. Correct. 25 Q. What change would you like to make? 106 1 A. I would like it to read "in 2005", please. 2 Q. Thank you. As it says at paragraph 2 of your witness 3 statement, you held the position at Post Office Limited 4 until 31 December 2005. 5 A. That's correct, Mr Stevens. 6 Q. Could I ask you, please, to turn to page 38 of the 7 statement. 8 A. I have it. 9 Q. Thank you. Is that your signature? 10 A. Yes, it is. 11 Q. Subject to that one change, can you confirm that the 12 statement is true to the best of your knowledge and 13 belief? 14 A. It is. 15 Q. Thank you, Mr Mills. That now stands as your evidence 16 in the Inquiry. It will be published on the website 17 shortly. I'm going to ask you a few questions about it. 18 A. Thank you. 19 Q. You, as you've just said, were the Chief Executive of 20 Post Office Limited from 15 April 2002 until 31 December 21 2005? 22 A. Correct. 23 Q. Before then, you had a career in banking? 24 A. I did. 25 Q. Am I right that your last role before Post Office 107 1 Limited was as General Manager of Personal Banking for 2 HSBC UK? 3 A. Correct. 4 Q. Was that a Board role? 5 A. No. 6 Q. Had you held any Board rolls before Post Office Limited? 7 A. Many. 8 Q. Had you held a Managing Director or CEO role? 9 A. Not in those words, no. 10 Q. But a role akin to? 11 A. But in practice, yes. 12 Q. Thank you. We don't need to turn it up, I want to look 13 at the board you came to. In paragraph 52 of your 14 witness statement, which is page 15, you say: 15 "As I note above, when I joined Post Office Limited 16 there were irregular Board meetings. On arrival at Post 17 Office Limited, the Board was therefore not exercising 18 proper or effective oversight of any function." 19 Could you explain why the Board wasn't exercising 20 oversight when you arrived at Post Office Limited? 21 A. The Board wasn't functionally organised. It only had 22 four directors. They met infrequently and not on 23 a regular basis and they dealt with matters that were of 24 importance to Royal Mail Group. They were not into the 25 detail of running the company. 108 1 Q. You mentioned that there were four directors? 2 A. Yes. 3 Q. The first was a Chief Executive; is that right? Or 4 should I say when you joined, you were appointed as 5 Chief Executive? 6 A. Yes, but that's not one of the four directors. That was 7 before my time when I was trying to illustrate to you 8 that the Board was not -- I didn't think -- in control 9 of Post Office Limited. 10 Q. So what were the four directors' roles when you joined? 11 A. They didn't have specific roles, in the sense that 12 I created in the Board that I subsequently made and 13 managed. There was the Chief Executive of Royal Mail 14 Group; there was the Chief Executive of Royal Mail; 15 there was David Miller, the Chief Operating Officer; and 16 there was the Finance Director, Peter Corbett. And that 17 was it. 18 Q. That was the Board. Is there a separate executive 19 management team that sat below that board? 20 A. Yes, eventually. As I say, when I got there, I didn't 21 think there was a functioning board, so I went about 22 establishing what I thought were the normal functions of 23 the conventional board of a very large company and 24 I established roles, for example, IT Director; for 25 example Sales and Marketing Director; all of the normal 109 1 functions that you would have expected existed in 2 a normally large company. Those positions were held by 3 members of the Executive Team. So we not only had Board 4 meetings but we that Executive Team meetings. 5 For example, we had Board meetings that met 6 bimonthly, we had Executive Team meetings that met 7 monthly and then all of the executives met every morning 8 at 9.00 on a Monday -- sorry, not every morning: met 9 every Monday at 9.00. 10 Q. So you say in your statement that you saw building 11 a proper Board structure as an important matter? 12 A. Critical. 13 Q. Was that something you took on yourself or was it 14 a direction given to you by someone else? 15 A. No, it was something that I felt was essential to 16 running an extremely large company. 17 Q. You referred to, in your evidence, making roles on the 18 Board for IT? 19 A. Yes. 20 Q. Was that Alan Barrie who fulfilled that role at the 21 start? 22 A. It was, yes. 23 Q. For Sales and Marketing, that was the other role you 24 referred to? 25 A. Gordon Steele. 110 1 Q. In your evidence, you also refer to HR? 2 A. Correct. 3 Q. Who fulfilled that -- 4 A. John Main. And they were not appointed immediately as 5 directors because Post Office Limited was insolvent. It 6 was a crisis. 7 Q. Yes, and is it fair to say that you saw your priority, 8 your key priority, as bringing Post Office Limited back 9 to solvency. 10 A. Well, I didn't realise that when I was appointed but it 11 didn't take me very long to realise that we had 12 a burning ship it was losing £1 million every single day 13 it operated. 14 Q. Can I ask -- so we've looked at IT, Sales, Marketing, 15 HR, you've referred to Finance and Operations already, 16 Operations being David Miller. 17 A. Yes. 18 Q. Did you give consideration as to whether there should be 19 other roles represented at the Board? 20 A. Yes. We had -- eventually we had a Banking Director and 21 we also had -- gosh, now, what else does it -- I'm sorry 22 I can't recall what else it was but there were two more 23 roles. 24 Q. We'll come to this in more detail in the future but, 25 when we're dealing at the start, or when you arrived, 111 1 did you ever consider appointing something akin to 2 a General Counsel or Head of Legal for Post Office 3 Limited? 4 A. Definitely not. 5 Q. Why? 6 A. Well, those roles on the legal front were undertaken by 7 the legal function of Royal Mail Group. We had really 8 quite a strange arrangement in as much as a number of 9 central functions of the Royal Mail Group were 10 undertaken for and on behalf of Royal Mail and Post 11 Office Limited. 12 So, in a sense, there was no need for a General 13 Counsel role at Post Office Limited because there was 14 already one in existence at Group level that one could 15 draw upon. 16 Q. Did you have any oversight of the Royal Mail Legal 17 Department in your position as a director on the Royal 18 Mail Board? 19 A. No, none at all. 20 Q. Did you, at the time, consider that to be problematic 21 where the legal function was dealt with by the parent 22 body, over which you didn't have oversight? 23 A. Yes, I did. 24 Q. Did you communicate that concern to anyone? 25 A. It took a little time to for it to dawn on me that 112 1 I wasn't comfortable. 2 Q. When did it dawn on you? 3 A. It probably took at least six months for it to dawn on 4 me. 5 Q. What was the concern? 6 A. There wasn't a concern in the sense of the strength of 7 the concern; it was merely a fact that I didn't have my 8 own personal arms around these central functions and, 9 therefore, could tell them directly what I wanted them 10 to do and, therefore, was in control of it. Pay and 11 rations and, if they didn't like it, well, I could tell 12 them what to do with it, pay and rations. 13 Q. We'll come back to that, when looking at prosecutions in 14 due course. Before I move on I want to look at some 15 other corporate structure issues. Michael Hodgkinson 16 was appointed as an independent chair in 2003; is that 17 right? 18 A. Yes. 19 Q. Were you involved in his appointment? 20 A. No, not at all. 21 Q. Were you satisfied that an independent -- I'm sorry, 22 I'll rephrase that. 23 What were your views on an independent chair being 24 brought in? 25 A. Well, I was pleased. 113 1 Q. Why? 2 A. Well, I think I probably hadn't realised quite how big 3 Post Office Limited was when I took on the job and 4 I certainly hadn't realised the condition that it was in 5 and, having someone as wise and as thoughtful and as 6 experienced as Sir Michael on the Board was just manna 7 from heaven. 8 Q. In February 2005, Alan Cook was appointed as 9 a Non-Executive Director? 10 A. Yes. 11 Q. Did you have any involvement in his appointment? 12 A. To the extent that I discussed it with Allan Leighton, 13 yes. I'd known Cook from NS&I days because I used to 14 deal with him when I was with HSBC or Midland Bank, so 15 I knew the man. 16 Q. What were your views of his appointment? 17 A. I was pleased. 18 Q. Why? 19 A. Well, he was another man who was experienced, he'd had 20 a long time in the financial services industry. 21 I wasn't surrounded by people who knew about that 22 industry, and that's the direction that I thought was 23 the solution to Post Office Limited's problems. He'd 24 also had good experience dealing with government 25 departments, so he was a good choice. 114 1 Q. I want to look at your role as Chief Executive, please. 2 Would you accept that, as Chief Executive, you had 3 ultimate executive accountability for the operation of 4 Post Office Limited? 5 A. Of course. 6 Q. Would you agree that identifying, analysing and managing 7 risk is an important part of running a company? 8 A. Definitely. 9 Q. Is it fair to say that that goes to the heart of the 10 role of the company executive? 11 A. Yes. 12 Q. Do you accept that good risk management requires 13 an executive to be proactive in identifying risks? 14 A. Yes. You can't just hope they come and jump up before 15 you; you've got to go and find them. 16 Q. That applies to the Chief Executive as well as the 17 people who report to him or her? 18 A. Of course. 19 Q. Did Post Office Limited maintain risk registers when you 20 joined the company? 21 A. No. 22 Q. When did Post Office Limited start to maintain risk 23 registers? 24 A. I'm not exactly sure but the first thing that 25 Sir Michael Hodgkinson did was to decide that we needed 115 1 a Risk Committee, and he established it and chaired it, 2 and I thought to myself, "Well, that's jolly good", 3 because we've got somebody now with good professional 4 experience, chairing the committee that needed to look 5 at these things, and that's something that I can leave 6 to Mike, I was very happy to do that, whilst I got on 7 with other things. 8 I remember -- I really would like to remind you that 9 I was trying to deal with the biggest risk of all that 10 this company faced. This company, without a question of 11 doubt, faced going under. Now, that wasn't just a risk 12 that affected all of the people within it or with all 13 the suppliers, or anything like that at all. Post 14 offices were everywhere. They were -- there wasn't 15 a village that they wasn't in. So if Post Office had 16 gone under that would have been seriously deleterious 17 for this country. 18 Q. Yes, Mr Mills. It's in your witness statement, as you 19 say, the serious risk that insolvency -- well, the risk 20 that faced Post Office Limited. Can I just clarify on 21 the risk register point, please. Do you think that was 22 introduced after Sir Michael Hodgkinson was appointed 23 Chair? 24 A. I think it would have been but, I'm sorry, I don't know. 25 Q. How was risk and the risk management handled prior to 116 1 a risk register being implemented? 2 A. I don't know. 3 Q. When you joined as Chief Executive what steps did you 4 take to identify the risks that faced the business? 5 A. I'm sorry, I thought I'd made it clear. I didn't 6 identify the risks on a one-by-one basis, as you're 7 discussing. My first priority was to try to set 8 a course that stopped the company from going bankrupt. 9 It took me at least six months to really understand what 10 was going on. This was a very non-trivial company. 11 I didn't have any briefing whatsoever about it. I had 12 no papers, no people telling me what was going on. 13 I had to try to discover all of these things myself. 14 So, I'm sorry, but I didn't go around trying to build 15 a number of what are the risks. 16 Q. In effect, then, in terms of the resources you had, that 17 was fully occupied with looking at the solvency and you 18 didn't have the resources to deal with, for example, the 19 risk register; is that your evidence? 20 A. It's sort of my answer. I mean, you're putting words 21 into my mouth. I didn't have the brainpower to cope 22 with any more than I was coping with during those first 23 six months. I'm very sorry but I didn't. 24 Q. Before I move on, can I ask if your remuneration was 25 fixed or performance based? 117 1 A. First of all, it was fixed and then I recall that the 2 Secretary of State made it extremely clear to Allan 3 Leighton that she expected the senior executive of the 4 entire group to have remuneration that was performance 5 based and that the targets for that performance should 6 be stretching, and that the rewards for that stretching 7 success were not to be miserly, they should be generous. 8 So it -- 9 Q. Sorry. 10 A. I eventually joined a thing called the LTIP, the 11 long-term improvement plan, or something like that. 12 Q. Do you recall how your performance was measured? 13 A. I do, yes. I had quite serious meetings with Allan 14 Leighton who wanted to know what I'd done and when I'd 15 done it. 16 Q. What specifically did he want to know you had done? 17 A. Turned the company into profit. 18 Q. So it was profit-based targets? 19 A. No, I didn't say that. You asked me what specifically 20 did he want to know and I told you. He wanted to know 21 whether I was going to get this company into profit. 22 Q. Sorry, let me rephrase the question. In terms of how 23 your performance was measured, was it measured by 24 reference to how successful you were or your plan was to 25 bring the company back to profit? 118 1 A. Well, one of the measurements was did I create 2 a strategic plan that held for the next three years and 3 was approved by Government? That would have been one of 4 the things. But I want to -- I really want to try to 5 emphasise to you that the whole thing was about can we 6 save this place? 7 Q. Mr Mills, in your evidence you've referred to that. You 8 also say -- we can bring this up, actually, it's in the 9 witness statement at page 4, paragraph 12, please. 10 A. Yes, I have it. 11 Q. I'm just waiting for it to follow on the screen, sorry. 12 A. I'm so sorry. 13 Q. No need to apologise. 14 You refer to: 15 "As well as the overriding objective to make the 16 company profitable, I was also conscious of my other 17 obligations as Chief Executive and as a director of Post 18 Office Limited." 19 You go on to say: 20 "I was throughout conscious of my duty as a director 21 to ensure that the company was run in an honest, 22 effective and ethical manner." 23 Finally, you say: 24 "Further, I understood that my duties were not only 25 owed to existing shareholders but also to the wider 119 1 organisation, including Post Office Limited's employees, 2 and to ensure that it had a viable future." 3 And that can come down, thank you. 4 Subpostmasters aren't employees, are they? 5 A. Not in the conventional sense but, for the purposes of 6 this Inquiry, you could regard them as so. 7 Q. Did you see your duty as a director to include 8 considering how changes in management affected 9 subpostmasters? 10 A. Definitely. Yes, definitely. 11 Q. One last question on corporate governance, before I move 12 on. Did you apply or take into account any Codes of 13 Practice or codes that were relevant to corporate 14 governance and management? 15 A. No, not in the sense that you mean. In the sense that 16 you meant, was I following the normal corporate codes, 17 for example, of the Companies Act 2006? What I was 18 trying to do was follow the general ethical code that 19 I'd learnt through 40 years being in one of the UK's 20 biggest banks, and the ethical codes that were employed 21 there were very, very strict indeed, and worked, and 22 I was doing my best to employ many of the lessons that 23 I'd learnt in that period in Post Office Limited. 24 To have tried to cover them with regulatory work at 25 the time that I was trying to do it would not have been 120 1 possible. You would not have been able to change the 2 organisation at the pace that that needed. 3 Q. Please can I just clarify that. When you referred in 4 your evidence a moment ago to ethical code that you 5 learned or gained experience of over the years, are you 6 referring to a specific written ethical code or general 7 experience that you picked up in running various 8 companies? 9 A. Well, not just that, I was on a number of regulatory 10 bodies, including the Personal Investment Authority, 11 I was also on the Arbitrary (sic) Council, and so forth. 12 So I was very familiar with the way in which regulatory 13 bodies handled large companies, admittedly all in the 14 banking sector. 15 Q. Yes, but when you use the specific word "ethical code", 16 are you referring to a particular written document? 17 A. No, I'm not. 18 Q. Thank you. 19 We'll turn, then, to looking at some issues relating 20 to Horizon. Please could we bring up page 5 of the 21 witness statement, paragraph 14. This is picking up on 22 a theme in you mentioned earlier. You say: 23 "When I joined POL [Post Office Limited], I was 24 barely briefed on anything by anyone. Even the building 25 Security Team was not expecting me on my first day -- 121 1 I arrived to an empty open-plan office, and began work." 2 At paragraph 15 you refer to the priority, when you 3 started at POL: 4 "... after gaining an understanding of the business 5 ... to formulate a strategic plan." 6 You say also in your statement, that you knew about 7 the Horizon system and you say that it was: 8 "... delivered quite sometime before my arrival." 9 Who gave you any information -- I'll rephrase that, 10 sorry. 11 The information that you had on Horizon, who gave 12 that to you? 13 A. Miller. 14 Q. David Miller? 15 A. Yes, David Miller. 16 Q. When did he give you that information? 17 A. Probably on my first day. 18 Q. Did he, when speaking to you, did he refer to any of the 19 difficulties that Post Office Limited had faced during 20 the trial and rollout of Horizon? 21 A. No. Mainly our conversations revolved around the fact 22 that Horizon had been started as a way of automating the 23 transactions of -- gosh, who the devil was it? I'm 24 sorry, it's called old age. 25 Q. The Benefits Agency? 122 1 A. The Benefits Agency, I'm very sorry. Do forgive me. 2 Q. No need to apologise. 3 A. No, they'd gone a long way with automating what the 4 Benefits Agency wanted and then, eventually, the 5 Benefits Agency said, "No, we don't want all that, it's 6 all costing have too much, we can do these things 7 differently and we're pulling out". So that left the 8 Post Office with a major decision: did they take this 9 system and try and amend it, or did they write it off? 10 If they'd have written it off, it would have been 11 a massive write off for the Government. Just a huge hit 12 on the bottom line, of a company that was already 13 insolvent. So they decided that they would refurbish 14 this thing and try and use it to, unbelievably, automate 15 the entire back office of the Post Office, all in one 16 go. Well, that was what I knew about Horizon. 17 Q. Please can we bring up your witness statement page 26, 18 please, paragraph 91. 19 If we can have 90 and 91 together, please. Thank 20 you. 21 Similar to what you said, you refer at the end of 90 22 to the system being repurposed in a way to automate the 23 entire back office of the branch network. You say: 24 "With hindsight, Horizon should not have been 25 repurposed in that way. It has become evident that it 123 1 was not fit for purpose." 2 At the time, were you given any impression or any 3 understanding that the repurposing of the system had 4 a negative effect on the actual end product? 5 A. No one has specifically mentioned it. But I would 6 easily have expected it. I had been the IT Director of 7 Midland Bank and we had rewritten the entire retail 8 banking system for the bank and there was only one way 9 to do that. It was not to try to remake the elephant 10 all in one go. It was to bite it in tiny pieces. 11 Q. Were you sceptical, then, of, as you describe it, the 12 repurposing of -- 13 A. Definitely. 14 Q. Did you do anything because of your scepticism? 15 A. Yes. 16 Q. What did you do? 17 A. Well, it was pretty obvious that Horizon was not going 18 to be written off, nor was it going to be closed down. 19 No one would have accepted that in Government or, 20 indeed, in the wider surroundings. So I made it very 21 clear, very early on, that we had to do a number of 22 things with Horizon. The first thing was to reduce its 23 cost because, remember, my primary activity was to try 24 to keep this thing afloat. So we needed to reduce its 25 cost to something like you would normally expect 124 1 a company to be paying for its IT. Now we were paying 2 well above what you could have expected and, normally, 3 that would have been 15 per cent of non-interest 4 expenditure. It's sort of, you know, a rule of thumb, 5 sort of thing. So I basically said we must reduce the 6 costs of Horizon. 7 And, at the same time, we must begin to think now 8 about how are we going to replace it within the 9 contractual term, which was basically five years hence, 10 and that's the amount of time you really need to think 11 about how you replace a system this size and scope and 12 complexity. 13 Q. Did you at any point think that you needed to 14 investigate how robust or how adequate the system was in 15 recording transaction data? 16 A. No, not at the transaction data level. I thought very 17 early on that I needed to understand what was happening 18 to this system in the hands of the user. So it was not 19 at all unusual for me to go out and directly visit 20 a subpostmaster who were using the system to ask them 21 how they were getting on with it, what were the problems 22 with it, what were the good things about it, how were 23 the things happening in their branch, and that was a -- 24 you know, I did that regularly. 25 And we also set up a model office, because, very 125 1 often, even with a very well performing IT system, you 2 can create a model environment and examine it 3 forensically to see how it's working, what we can do to 4 improve it. If the glass of water is over there, that's 5 too far to reach. We want the glass of water here's. 6 So many, many tiny things can be done to make 7 a performing system perform much better. 8 Q. Why did your scepticism not include how the Horizon IT 9 System recorded transaction data? 10 A. I don't know. Maybe it's because in those days of -- 11 this is very early days for computers in the scheme of 12 things and, in those days, most people thought that 13 computers did work and that they produced an answer that 14 was logical and reasonable and would do the finished 15 job. Also, don't forget that this thing had been run, 16 it had been piloted, it had been acceptance tested. So 17 it had gone through many stages before I was there. It 18 had been live for two years before I arrived. 19 Q. Did you ask anyone about how the rollout, the testing 20 the pilot, went, and how Post Office Limited, how 21 satisfied it was with the rollout, testing and pilot? 22 A. Yes, of course I did. I just said I was talking to 23 subpostmasters on a regular basis. A very regular 24 basis. 25 Q. So that was with subpostmasters? 126 1 A. Yes. 2 Q. What about anyone in the Post Office IT Department? 3 A. No, I didn't, actually, because, in a sense, we didn't 4 have an IT Department. We had Fujitsu. That was the IT 5 Department, in reality. 6 Q. What about Alan Barrie? 7 A. Yes, he was the IT Director but he didn't have a load of 8 code writers behind him and, of course, I did ask him, 9 obviously, you know, how things were going and what was 10 happening. 11 Q. Did you feel that you had sufficient IT expertise within 12 Post Office Limited to properly understand whether 13 Horizon was adequate? 14 A. No. 15 Q. Why did you not try to address that? 16 A. I did. 17 Q. How? 18 A. Recruiting Ric Francis, for example, who was the IT 19 Director who succeeded Alan Barrie. 20 Q. In all of this, when you're asking questions about the 21 pilot and the testing, et cetera, you may have covered 22 this in your evidence already but, just to be sure, did 23 you discuss that with David Miller? 24 A. Yes. Miller is a crucial man in this. He is very 25 thoughtful, he worked extremely hard, he was running the 127 1 network and he was running the network with aplomb, in 2 my view, given the things that we were trying to do. 3 Q. Please could we bring up your witness statement page 34, 4 paragraph 124. You say that: 5 "I have been asked whether I was concerned by the 6 nature or frequency of allegations made by 7 subpostmasters that Horizon was directive. To be clear, 8 whilst at [Post Office Limited] I was not made aware of 9 complaints to the effect that Horizon was compromised." 10 Can we now bring up POL00328107. This is a letter 11 from Dave Barrett of Post Office Limited, it's dated 12 29 October 2003. Dave Barrett's job title was Head of 13 Commercial Urban Area, Wales, The Marshes and 14 Merseyside; did you know who Dave Barrett was? 15 A. No. 16 Q. As you'll see, it refers to a letter about Alan Bates 17 sent by Betty Williams MP and, in the second paragraph, 18 it refers to Post Office terminating Mr Bates' contract 19 because of a loss of confidence in his willingness to 20 conduct the job in the manner expected. Were you aware 21 of Alan Bates at around about this time? 22 A. No, not at all. 23 Q. If you turn to page 4, please, this is a letter from 24 Betty Williams MP to Stephen Timms MP, who was Minister 25 of State for E-Commerce Energy and Postal Services. Do 128 1 you remember Mr Timms MP? 2 A. I remember Stephen very well indeed. 3 Q. He was the Minister at the Department for Trade and 4 Industry when you were Managing Director? 5 A. Yes, an excellent man. 6 Q. You will see in that letter Betty Williams MP, if we go 7 down, refers to a conversation which she'd had with 8 Mr Barrett, and says: 9 "His arrogant attitude was wholly unacceptable." 10 Well, she asked Mr Timms to make a complaint to 11 Allan Leighton regarding the matter. If we turn to 12 page 7, please, this is Stephen Timms's letter in reply 13 to Betty Williams on 17 November 2003. At the bottom it 14 says: 15 "However, in view to your concerns, I have passed 16 your correspondence to David Mills, the Chief Executive 17 of Post Office Limited, and have asked him to 18 investigate the matter and respond to you direct." 19 Over the page, we see Mr Timms' letter to you. Do 20 you recall receiving this letter. 21 A. I don't but I'm not at all surprised that Stephen sent 22 it to me. I liked Stephen a lot, we got on very well. 23 He worked extremely hard to do his job and I would have 24 done anything I could to have helped him. 25 Q. Would you have expected a letter from the Minister 129 1 responsible for the Post Office to be put onto your 2 desk? 3 A. No, no, I'm not saying that. What I'm saying is that 4 not at all surprised that Stephen wrote to me. 5 Q. Well, I'll ask you: would you expect a letter sent by 6 the Minister responsible for the Post Office -- 7 A. Yes, I would have done, yes. 8 Q. You say you can't recall it, do you think on balance, 9 it's likely you would have received this? 10 A. I probably did, yes, and probably I'd have taken the 11 wrong thing out of it. I would have been, probably, 12 incensed that one of our Area Managers, Barrett or 13 whatever his name was, had been rude and arrogant, and 14 so forth, to Betty Williams and, if you look at her 15 note, she's got a handwritten note, you can see that it 16 does seem that this chap was not good with her. So I'd 17 have probably progressed that, rather than Mr Bates, 18 which I'm -- you know, I'm not saying is right at all; 19 I'm saying that's what I think I might have done. 20 Q. But it's apparent you can't actually remember what you 21 did do? 22 A. No, I'm sorry, I can't. 23 Q. Please could we turn to page 9 of the same document. 24 This is a letter on 11 November 2003, again to 25 Betty Williams MP, this time from Alan Bates, so 130 1 11 November just before Stephen Timms's letter to you. 2 In the fourth paragraph down, it says: 3 "The comments made in his letter about 'lost 4 confidence' [that's referring back to the termination 5 reason] etc, is really just a smokescreen to try and 6 justify their actions from their position. The real 7 through behind all this are the problems with the Post 8 Office Horizon system and the lengths that the Post 9 Office will go to keep it covered up." 10 In the next paragraph down, it says: 11 "With regard to the response you received from the 12 Minister I can see that Post Office is using its 13 'contractual issue' reply with him again, but he really 14 needs to look into the Horizon issues. It is Horizon 15 which in one way or another is causing the problems." 16 Then over the page, please. The second paragraph 17 down says: 18 "Post Office Limited are terrified about the real 19 facts with Horizon being known and it seems they will 20 stop at nothing to keep them hidden." 21 If we move on to page 11, please, it's a letter from 22 Betty Williams to Stephen Timms of 19 November, 23 enclosing the letter we've just referred to by Mr Bates. 24 Then, finally, please, if we can go to page 12. 25 Mr Timms' response on 8 January, at the bottom of the 131 1 second paragraph, he says: 2 "However, in view of the concerns raised by Mr Bates 3 as to the validity and reliability of [Post Office 4 Limited's] 'Horizon' computer system, which he sees as 5 a factor in his dispute, I have had my officials contact 6 the company to receive their response to the issues 7 raised." 8 It goes on to discuss Horizon but then says: 9 "I understand that the management of [Post Office 10 Limited] do not share Mr Bates's concerns and are fully 11 confident as to the reliability of the Horizon system." 12 It goes on to say: 13 "They have found no evidence to suggest that there 14 is any fault with the Horizon system and maintain that 15 the decision to terminate Mr Bates' contract was 16 legitimate." 17 Do you recall being made aware of these concerns by 18 Mr Bates? 19 A. No. 20 Q. Given the working relationship you had with Mr Timms at 21 the time, is it likely that you would have been made 22 aware of those concerns? 23 A. No, I don't see the connection with your question. 24 Q. Well, earlier in your evidence, you said you worked 25 closely with -- 132 1 A. Yes, but -- 2 Q. Well, you had a good -- 3 A. -- I'm sorry, you're trying to connect that with people 4 giving me evidence that there was something wrong with 5 Horizon, which I didn't have. 6 Q. Let's take it in stages, Mr Mills. Firstly, based on 7 your working relationship with Mr Timms, do you think 8 you would have discussed the concerns raised by Alan 9 Bates with him? 10 A. No, because I wasn't aware of those concerns. 11 Q. So is your evidence, or what you think happened, 12 Mr Timms raised it with the company but raised it with 13 someone else? 14 A. I think so, looking at this correspondence. 15 Q. Who else in the company would be responsible for dealing 16 with requests such as this from the Department of Trade 17 and Industry? 18 A. I'm not sure. It depends to where it was addressed but, 19 if it was something of an IT type it would have been 20 Alan Barrie. 21 Q. So is it your evidence that Alan Barrie would have had 22 a direct line of report to the Department of Trade and 23 Industry? 24 A. No, I didn't say that. 25 Q. So who then -- 133 1 A. I don't know is the answer to your question. 2 Q. How often did you meet with Mr Timms around this time? 3 A. No, I didn't meet with him regularly. I spoke on the 4 telephone. 5 Q. How often did you speak with him on the telephone? 6 A. Oh, infrequently. 7 Q. When you say "infrequently" ... 8 A. Three or four. 9 Q. Three or four, what, is that times a month or -- 10 A. No, in total. 11 Q. In total? 12 A. Yes. 13 Q. Three or four times. Over how long of a period? 14 A. The length of the time that I was with the Post Office. 15 MR STEVENS: Can we move on, please. 16 Actually, sir, this is probably a good time to take 17 a short break because it's moving to a different topic. 18 SIR WYN WILLIAMS: Certainly. Do you want a 10-minute 19 break, a 15 -- 20 MR STEVENS: I think ten minutes will be fine, sir, thank 21 you. If we could say 3.20 past. 22 SIR WYN WILLIAMS: All right, fine. Thank you. 23 MR STEVENS: Thank you, sir. 24 (3.08 pm) 25 (A short break) 134 1 (3.19 pm) 2 MR STEVENS: Good afternoon, sir, can you still see and hear 3 us? 4 SIR WYN WILLIAMS: Yes, I can, thank you. 5 MR STEVENS: Thank you. I'd like to move to the case of 6 Cleveleys, please, and start with POL00158493. 7 This is an email from Keith Baines to David J Mills; 8 that's you, isn't it? 9 A. Yes, that's me. 10 Q. Keith Baines is noted as a Contract Manager at Post 11 Office Limited in the IT Directorate. Do you recall 12 working with Keith Baines? 13 A. No, but I know who he is. He negotiated the lock with 14 Fujitsu. 15 Q. The subject is "Action from your visit to the IT 16 commercial team meeting". 17 A. Yes. 18 Q. What was the IT commercial team meeting? 19 A. Well, it was just a visit to the IT, so I knew -- or get 20 a feel for the people merge there and asked them 21 probably inane questions but helped me to learn more 22 about the business. 23 Q. It says: 24 "David 25 "You asked who within Post Office was instructing 135 1 the lawyers in the case referred to in the following 2 risk on the IT risk register ..." 3 Pausing there, do you remember what the IT risk 4 register was? 5 A. Yes. 6 Q. What was it? 7 A. It was just a register of those risks that the IT 8 thought may affect them and/or the company. 9 Q. Who had access to the IT risk register? 10 A. I'm sorry, I don't know. 11 Q. Who was responsible for putting risks on the IT risk 12 register onto the Post Office Limited Board's risk 13 register? 14 A. Well, ultimately, it would have been Alan Barrie and/or 15 Ric Francis, subsequently. 16 Q. But, if you were aware of a risk on the IT risk 17 register, presumably you would accept responsibility for 18 putting that onto the main board's risk register, as 19 well? 20 A. Yes, I would but I wouldn't have done in this case 21 because I was just on a walk around and noticed this 22 particular risk, which I asked about. 23 Q. So the risk says there: 24 "'Damage to reputation of Post Office and potential 25 future financial losses if [Post Office] loses court 136 1 case relating to reliability of Horizon accounting data 2 at Cleveleys branch office'." 3 What did that mean to you at the time when you read 4 it? 5 A. Well, actually, that meant nothing to me at the time. 6 What did catch my eye was that the potential financial 7 loss was £1 million. 8 Q. Was £1 million? 9 A. Yes. 10 Q. Well, looking -- 11 A. So, naturally, I said to this fellow Baines, you know, 12 "let me know about that, please. I want to know more 13 about it". 14 Q. Taking it in stages from what that says and what it is, 15 firstly, someone has brought a court case against Post 16 Office Limited, yes? 17 A. Yes. 18 Q. Part of that court case concerns the reliability of the 19 Horizon accounting data, yes? 20 A. Yes. 21 Q. The IT Department had considered that to be a risk 22 worthy of going on the IT risk register? 23 A. Correct. 24 Q. So the risk related to IT and not, for example, just 25 a general legal risk? 137 1 A. No. Everyone was supposed to be identifying their own 2 risk. This was an IT risk. 3 Q. It says there's "damage to reputation of Post Office and 4 future financial losses". What did you understand the 5 future financial losses to be? 6 A. £1 million. 7 Q. They're saying the amount is £1 million, how did you 8 understand the Post Office risked losing £1 million? 9 A. I didn't know, I didn't understand that. I saw a risk 10 register, it was registering a figure of £1 million. 11 Anyone with any brains would have said, "I need to know 12 more about this". 13 Q. There's sufficient information there, isn't there, to 14 see that someone was putting the reliability of Horizon 15 into issue in court proceedings? 16 A. Yes, there is. 17 Q. Did that concern you? 18 A. No, because I asked about it to find out about it. So 19 just reading that wouldn't -- I wouldn't even have taken 20 that in when I read it. What I would have taken in is 21 £1 million. 22 Q. When you asked about it, what were you told? 23 A. This is the response. 24 Q. Ah, sorry. We'll wait for that to come back up. 25 SIR WYN WILLIAMS: While Mr Stevens is waiting for that to 138 1 be put back up, the £1 million that you've mentioned, 2 Mr Mills, actually, it's the first time I think I've 3 heard that figure. Was that something written on the 4 risk register or was that something you learnt from 5 another source? 6 A. No, I think it was written on the risk register. 7 SIR WYN WILLIAMS: Right. 8 MR STEVENS: Sir, we can assist with that. I'll go to it in 9 a moment once we're finished on the document. 10 SIR WYN WILLIAMS: Fine. 11 MR STEVENS: Thank you. 12 So I asked what question you raised about this and 13 you say this is the response. 14 A. Correct. 15 Q. This still doesn't tell you what the challenge to the 16 reliability of the IT system was, does it? 17 A. Correct, it does not. What it -- 18 Q. Did you ask what that was? 19 A. No. 20 Q. Why not? 21 A. I wasn't that clever. I'm sorry, I didn't ask about it. 22 Q. Well, let's look -- if we look to the next paragraph, it 23 describes who is providing instructions. It says: 24 "The case is scheduled for the week commencing 25 16 August, and we have offered settlement and paid money 139 1 into court based on what the subpostmistress would have 2 received for 3 months notice." 3 A. Correct. 4 Q. Did it not concern you that an offer of settlement had 5 been made in a case where the reliability of the Horizon 6 IT System was in issue? 7 A. No. Because I hadn't properly assimilated the fact that 8 the reliability of Horizon was in doubt. I hadn't got 9 that in my mind. What I'd got in my mind was £1 million 10 and, looking at this email, it looked pretty certain to 11 me that we were going to settle for three months' notice 12 and, at the level that I was operating at, that seemed 13 an end to that issue. 14 Q. Let's look at the risk register then, please. This is 15 an Excel document, POL00120833. If we could open the 16 Risk-Opps (P5) tab. Thank you. 17 So we see, at the top, "Directorate: IT", Commercial 18 and then Alan Barrie, so that's the IT Director who 19 reported to you. The same risk is in the first line, 20 it's in the description, and the risk is set at 21 £1 million. "Action": 22 "[Royal Mail] Legal Services have made an offer for 23 out-of-court settlement of the case. 24 "Review with Fujitsu of their processes to protect 25 against similar future cases." 140 1 Did you not want to know what this review with 2 Fujitsu entailed? 3 A. No, because I haven't read this risk register. This is 4 the first time I've seen this, other than this may have 5 been what I saw on my walk around. 6 Q. Yes, so I was going to say -- 7 A. But I don't know that it was because this isn't in my 8 mind and, looking at it, you can see why it probably 9 wouldn't have been. If I'd have been going round, 10 looking at desks and looking at risk registers and 11 looking at this, and I'd have looked at the first line 12 and it said, "Risk £1 million", well, I'd have probably 13 put that in my little notebook and said, "Tell me about 14 that". 15 Q. When it says, "Risk £1 million for potential future 16 financial losses", in the description, were you not 17 concerned that the future financial losses may be 18 connected to the criticisms of the Horizon IT System and 19 how it stored data? 20 A. No, because I hadn't spotted the criticisms of the 21 Horizon IT System. What I'd spotted was £1 million. 22 Q. Do you think you should have spotted the criticisms -- 23 A. No, I don't. 24 Q. Why not? 25 A. That's -- if I'd have concentrated on any issue at that 141 1 level, I'd have never got anywhere near to turning the 2 Post Office around. This was for Alan Barrie to deal 3 with, not me. 4 Q. Alan Barrie, as you say, is the IT Director but you 5 accepted earlier that ultimate executive accountability 6 for the Post Office Limited lay with you? 7 A. Of course. 8 Q. The Horizon IT System was a system that put recorded 9 transaction data -- 10 A. Yes. 11 Q. -- held by branches, yes? 12 A. Yes. 13 Q. From that data, Post Office Limited used that data, 14 sorry, to put together its management and statutory 15 accounts, correct? 16 A. Yes. 17 Q. It was important that the data was reliable, correct? 18 A. Yes. 19 Q. You knew all of that at the time? 20 A. Of course. 21 Q. I ask again: do you think, when you saw a risk register 22 that referred to a challenge to the integrity of 23 Horizon, that you should have asked more questions as to 24 what the challenge to the integrity was? 25 A. I think I've said this already but I think I said to you 142 1 that I hadn't assimilated that point. The point that 2 I had assimilated is £1 million. Now, whether I should 3 have followed up on things that I hadn't assimilated 4 I think is really hypothetical. 5 Q. I'll move on from that risk register to something 6 related. Could we go to WITN00 -- 7 Actually, no, sorry, before we go there, please can 8 we go POL00142503. This is an email from Rod Ismay; do 9 you remember working with him? 10 A. No. I know the name, I know the man to look at, 11 especially because I've been reminded on the occasions 12 that he's reported here. 13 Q. We've heard evidence this morning that Donna Parker was 14 David Miller's personal assistant? 15 A. Correct. 16 Q. Do you recognise the other names: Mandy Talbot, Carol 17 King or Tony Marsh? 18 A. Yes, I recognise all the names. I don't know the 19 people -- obviously, I know Marsh. I don't know Mandy 20 Talbot, I don't know Carol King but I've seen a lot of 21 their work in this Inquiry. 22 Q. This is, again, talking about the case of Cleveleys and 23 Mr Ismay sends on correspondence regarding the case, 24 including counsel's opinion. It goes on to say: 25 "In summary we suspended Mrs Wolstenholme in 2001 143 1 after apparent discrepancies in her cash accounts. We 2 claimed for the value of these losses and she counter 3 claimed for also of earnings. Within her claim was 4 an 'expert's opinion' which was unfavourable concerning 5 Horizon and Fujitsu." 6 It goes on to say about lodging payments into court. 7 We heard this morning evidence from David Miller about 8 him approving the settlement. Did you ever hear that 9 this case had settled? 10 A. No, I didn't. 11 Q. Can you explain why a settlement of this case wasn't 12 discussed at the board or Executive Team level? 13 A. Yes, Miller had delegated authority. 14 Q. The email here and Mr Miller's evidence was that this 15 would have been dealt with by Peter Corbett, usually -- 16 A. Correct. 17 Q. -- and it went to Mr Miller in his absence. 18 A. Correct. 19 Q. So was it your evidence that, if either of them had any 20 concerns, it was for them to raise at the Board? 21 A. Probably at Risk Committee, first of all, pre-Board. 22 Q. Could we please turn to WITN00210101 -- 23 SIR WYN WILLIAMS: Before you go there -- hang on, I was 24 just checking what it was you were putting up. Don't 25 worry. 144 1 I was simply going to ask Mr Mills whether he thinks 2 that, regardless of whether either Mr Corbett or 3 Mr Miller had delegated authority to settle, the fact 4 that there was an adverse expert's report about Horizon 5 should have been taken to the Risk Committee? 6 A. Yes, I think it should have been, Chairman. 7 SIR WYN WILLIAMS: Right. Thank you. 8 Sorry, Mr Stevens. Carry on, please. 9 MR STEVENS: No, sir. 10 We can actually look at that report now, if I could 11 bring that up. It's WITN00210101. This is Mr Coyne's 12 report in the case of Post Office v Julie Wolstenholme. 13 Could we please turn the page. I'm not going to read it 14 all out but, if we could go down to the bottom half of 15 the page, please, it refers to, penultimate paragraph: 16 "The majority of the system issues were screen 17 locks, freezes and blue screen errors which are clearly 18 not a fault of Mrs Wolstenholme's making, but most 19 probably due to faulty computer hardware, software, 20 interfaces or power. In fact, on a detailed view of 21 call 11021413, dated 2 November 2000, Ms Tagg may have 22 witnessed firsthand the style of system problems that 23 Mrs Wolstenholme experienced in her operation of the 24 system." 25 If we could turn to page 4, please. It says: 145 1 "In summary: 2 "From a computer system installation perspective it 3 is my opinion that the technology installed at the 4 Cleveleys sub post office was clearly defective in 5 elements of its hardware, software or interfaces." 6 I understand your evidence to be that you've never 7 seen this report before -- or sorry, I'll rephrase it. 8 Until the Inquiry sent it to you, you've never seen 9 it? 10 A. No, I haven't seen this report at all. 11 Q. If this report had been put before the Board or on the 12 risk register, what would you have done? 13 A. I'm not entirely sure because I've only seen three 14 paragraphs, a summary, and one paragraph that you 15 highlighted, so I'd need to read the whole thing in 16 detail and with some time to assimilate it in my mind 17 before deciding what I would have done with it. 18 Q. Mr Mills, this document was sent to you in advance of 19 this hearing. Have you not had a chance to read it? 20 A. I'm sorry, if it was, I would have read it, I can assure 21 you of that, and I might well have forgotten the fact 22 that I'd read it. 23 Q. Well, let me ask you this as a hypothetical, if you 24 received a report from a joint expert that raised 25 a concern that there was a reliability issue in Horizon, 146 1 what would you have done? 2 A. I would immediately have taken it down to Alan Barrie 3 and said let's talk to me about this, please. 4 Q. So you would have gone to your IT Director and taken his 5 advice, effectively? 6 A. No, not necessarily taken his advice. This is occurring 7 in Peter Corbett's area and Miller knows something about 8 it, so I would have started off with Barrie. 9 Q. What would you have done then? 10 A. Well, I don't know, it depends what Barrie had said to 11 me about it. I just don't know the answer to that. 12 Q. One element of this I want to explore and we saw it 13 earlier. There's Post Office Limited -- or someone from 14 Post Office Limited giving instructions with legal 15 advice coming from Royal Mail. In your witness 16 statement -- we don't need to have it on the screen -- 17 but it's page 15, paragraph 48, you say: 18 "With hindsight, the legal function should have been 19 reporting to me on matters relating to [Post Office 20 Limited] so that I could exercise oversight of it." 21 When you say "with hindsight", is this is an area 22 where you feel you would have been better served by 23 having legal in-house or in Post Office Limited? 24 A. Definitely. 25 Q. Why do you say that with hindsight? 147 1 A. Well, because I'm now looking back at what's occurred 2 during the many years, even when I was there, let alone 3 when I left. You can see that that things were dropping 4 through the slats and I'd have hoped that I'd have 5 helped to not let that happen. 6 Q. To what extent do you think it was a failing for Post 7 Office Limited not to have a legal function on its 8 Board? 9 A. I don't think it was a failing at all? 10 Q. Why. 11 A. Well, I -- perhaps I should remind you that I didn't 12 retire from Royal Mail, I resigned and I resigned on 13 matters of importance. 14 Q. What were those matters of importance? 15 A. I disagreed with some of the policies that were going to 16 be adopted by Royal Mail Group. 17 Q. Was one of those policies relating to where the legal 18 function sat, whether -- 19 A. No, it wasn't. 20 Q. So going back to what we were discussing, the issue of 21 whether it was a failing for Post Office Limited not to 22 have a legal function on it, why do you say it wasn't 23 a failing? 24 A. Well, because you have to be in the moment. It's very 25 easy to look back and say, well, it's obvious that you 148 1 should have had a legal function. We did have a legal 2 function. It was operated centrally by Royal Mail 3 Group. Everyone had got used to the fact that Royal 4 Mail Group provided certain functions from its centre 5 because it seemed to be more economical to have those 6 functions in a mass so that you could have the very best 7 people all in together and, of course, they were in 8 a different location, as well. 9 So, looking back, you could say to yourself, well, 10 that looked all right at the time, but now I look back 11 and I can say, no, it wasn't all right at the time; it 12 would have been better if it had reported within Post 13 Office Limited. 14 Q. Please can we bring up POL00072892. This is a letter 15 dated 6 December 2004 from Lee Castleton. It's 16 addressed to a Mr Knight but if we can go to the bottom, 17 please, we see that it says, "Copy to David Mills". 18 Again, I won't highlight all the letter, it has 19 been -- in fact, it's exhibited to your statement. In 20 the second paragraph, as part of Mr Castleton's 21 explanation of the problems he was facing with Horizon 22 and his subsequent suspension and termination, he says, 23 in the third line down: 24 "We explain we felt there must be something 25 reasoning with the computer system as we had looked 149 1 through our paperwork repeatedly but could not find 2 anything wrong." 3 The final paragraph, again, refers to computer 4 failure, third line down: 5 "All the paperwork that is required to prove the 6 computer failure has been removed from this office for 7 'investigation' so now having no paperwork to prove my 8 innocence I do not know how to move forward." 9 Were you aware of this letter? 10 A. Yes. 11 Q. At the time? 12 A. No, I don't think I was aware of it at the time. I am 13 now. 14 Q. How was correspondence such as this handled on your 15 behalf in your office? 16 A. I had a secretary who would normally stamp it in. So 17 I'd got a date stamp on what was received and, if it was 18 obvious where it was going to lie, she would pass it out 19 to whoever was going to deal with it, so if it was 20 Corbett, if it was whoever. 21 Q. Your voice trailed off at the end. 22 A. I'm sorry. If it was obvious where it was going to be 23 dealt with, she would pass it out to that entity before 24 I received it. 25 Q. Would you have expected a letter like that to be raised 150 1 with you? 2 A. Yes. 3 Q. But I take it from your evidence you can't recollect any 4 dealings with Mr Castleton's case? 5 A. No, I don't. 6 Q. Mr Castleton was involved in litigation brought by Post 7 Office. Were you aware of that litigation when you were 8 in post? 9 A. No. 10 Q. Please could we bring up POL00119895. This is a draft 11 note of a meeting titled "Horizon integrity" on 12 6 December 2005. We've referred to Keith Baines already 13 and Mandy Talbot, who you said you recognised the name 14 but not necessarily what she did. Do you recognise 15 anyone else in that list? 16 A. No. No one. 17 Q. You'll see, if we go to 1 and "Findings", it says: 18 "There is no generally understood process for 19 identifying emerging cases in which the integrity of 20 accounting information produced by Horizon may become 21 an issue." 22 There's a discussion on potential processes. If we 23 could turn to page 3, please, paragraph 14, it refers to 24 Mr Castleton's case. 25 "The Castleton (Marine Drive branch) case scheduled 151 1 for 7 February is the first of the current cases that 2 may require expert testimony; this will not be needed on 3 7 February, but could be needed the next time this case 4 is in court ..." 5 Were you aware of an internal meeting like this to 6 consider how Post Office Limited responded to Horizon 7 integrity cases? 8 A. No. 9 Q. Why? 10 A. Why should I be aware of it? 11 Q. Earlier in your evidence, you referred to having 12 ultimate executive accountability for the operations of 13 Post Office Limited, correct? 14 A. Yes. 15 Q. Do you accept that how Post Office deals with challenges 16 to the Horizon IT System is a significant part of its 17 executive function or its operations? 18 A. Yes. 19 Q. Do you accept that a policy such as that or a process as 20 to how Post Office deals with those types of cases is 21 something over which the board should have oversight? 22 A. No. 23 Q. Why not? 24 A. Because I think it's the return of a "Why don't 25 I understand and hear and know about this particular 152 1 meeting?" It's highly unlikely that I would know about 2 every meeting of some junior managers all over the 3 country. It's as simple as that. 4 Q. Let's rephrase the question, then. Not this specific 5 meeting. Were you aware that, internally, there was 6 a -- it was thought necessary to develop a process to 7 respond to challenges to Horizon -- 8 A. No, I wasn't and I'd have been very interested in the 9 fact that that existed because it would have meant that 10 we'd got problems with Horizon which I wasn't aware of. 11 Q. Can you explain why, as Chief Executive, you weren't 12 aware of that? 13 A. Yes, I think I can. Despite efforts to understand and 14 realise what was going on with Horizon, actually out in 15 the field, issues of the nature that you're discussing 16 never came to the Board and, in order to come to the 17 Board it would have had to have gone through the 18 directors or the executives, and none of those ever 19 raised that issue with me at all. 20 Q. Mr Miller, we earlier saw a risk register which showed 21 a challenge being made on the Horizon reliability. Why 22 wasn't that an alarm bell in itself? 23 A. For the same reason as I answered to that question 24 before. It was that I picked up the number 1 million 25 and not Horizon. 153 1 Q. Can we turn to look at prosecutions, please. No need to 2 turn it up but, for the record, it's page 19, 3 paragraph 65(a) of your statement. You say that it was 4 unusual for a company to be directly involved in 5 criminal prosecutions; do you agree with that? 6 A. Definitely. 7 Q. What was your understanding of Post Office's reasons for 8 being involved in prosecutions? 9 A. I'm sorry, could you repeat the question? 10 Q. What did you believe was Post Office's reasons for 11 bringing prosecutions itself? 12 A. There would be multiple reasons but broadly because 13 someone had offended against the Post Office and what 14 they did was supposed to be illegal. 15 Q. So, in respect of where the Post Office pursued a case 16 for theft, fraud or false accounting against 17 a subpostmaster, did you believe there was a deterrent 18 effect or it was a good deterrent to stop future alleged 19 theft, fraud or false accounting? 20 A. No, I don't think it was anything like that. I think 21 that, as with all of the whole of the United Kingdom, if 22 someone is found nicking something, they try to 23 prosecute them against it. I think it was as simple as 24 that. I don't think there was any question about let's 25 deter all these subpostmasters. That's the last thing 154 1 we wanted to do. We wanted to encourage them. 2 SIR WYN WILLIAMS: I think you and Mr Stevens may be at 3 cross purposes. I think you accept that it was unusual, 4 in fact maybe in your experience unique, for a company 5 themselves to initiate a prosecution. So I think 6 Mr Stevens is asking you -- 7 A. I'm sorry. 8 SIR WYN WILLIAMS: -- why the Post Office was doing that, as 9 opposed, say, to involving the police. 10 A. Thank you, sir. I stand -- I now understand what the 11 question is and I'm very grateful to you for pointing it 12 out to me. 13 I'd never worked for an institution that was capable 14 of prosecuting somebody in the courts in their own 15 right. It's not something that was in my purview. 16 I would never have dreamt of it. I would always have 17 thought that, if it had been in a bank, our audit 18 department may have found someone taking cash, we'd have 19 taken them to the police and said to the police "Here's 20 a chap who's nicking", they'd have taken it to the Crown 21 Prosecution Service, said "That's okay", and they'd have 22 ended up in court. 23 So I had no experience whatsoever of a company 24 taking somebody to court in their own right and I was 25 not aware that the Post Office could do that. 155 1 MR STEVENS: When did you first become aware that the Post 2 Office was involved with the prosecution of 3 subpostmasters? 4 A. Probably as very late as November 2005. The very last 5 knockings of my time there. 6 Q. Who told you? 7 A. I don't know. 8 Q. Mr Mills, your evidence is that this was a very unusual 9 matter? 10 A. Yes. 11 Q. Would it not have come as a surprise to learn that the 12 company you'd been Chief Executive of for several years 13 was prosecuting people without you knowing? 14 A. No, I knew they were prosecuting -- sorry, I knew they 15 were taking people to court, I didn't know they were 16 doing it in their own right without some sort of 17 external independent sign-off. 18 Q. Let's take it in stages. At an operational level, who 19 did you think was carrying out investigations where 20 subpostmasters were taken to court for theft, fraud or 21 false accounting? 22 A. The Investigation Team and the network. 23 Q. Who did you think was responsible for deciding whether 24 to prosecute? 25 A. I actually thought that it was Royal Mail Group's Legal 156 1 Department. 2 Q. Royal Mail Group Legal Department? 3 A. Yes. 4 Q. Who did you think was responsible for conducting the 5 prosecutions? 6 A. For conducting the prosecutions? I don't know who 7 I thought was responsible for conducting those 8 prosecutions. I don't know, I'm sorry. 9 Q. When were you first aware that Post Office Limited had 10 any involvement in the prosecution or investigation of 11 offences? 12 A. I don't think I was aware in the sense that you mean. 13 I think that I entered Post Office Limited with the 14 automatic thought that, if somewhere had 17,500 branches 15 and 65,000 staff, there would be an investigations 16 department and a prosecuting department. I just would 17 have thought that would have been natural because you 18 can't have that many people without criminality. 19 Q. It would probably help if we looked at some of the 20 documents, actually. Could we please look at 21 POL00021483. So this is a Board meeting on 20 August 22 2003 and you're listed in attendance -- 23 A. Yes. 24 Q. -- as is Tony Marsh? 25 A. Correct. 157 1 Q. Who was Tony Marsh? 2 A. He was Head of Security and I think Head of Security at 3 Royal Mail Group, or reported to Royal Mail Group. 4 Q. In your evidence, you say that Tony Marsh didn't report 5 directly or indirectly to you. What do you mean by 6 that? 7 A. Exactly what I say. 8 Q. Sorry? 9 A. Exactly what I said. He didn't report to me and I don't 10 think he reported indirectly to me either. I think he 11 reported to Group. 12 Q. We heard evidence this morning from Mr Miller -- David 13 Miller, sorry -- that he had regular meetings with Tony 14 Marsh. Were you aware of that? 15 A. I wasn't but I did know that Marsh reported on a dotted 16 line to him. 17 Q. So if Mr Marsh reported on a dotted line to David 18 Miller, and David Miller reported to you, did he not 19 report indirectly to you? 20 A. Yes. 21 Q. So where you say in your witness evidence that he, Tony 22 Marsh, didn't report directly or indirectly to you, 23 that's incorrect? 24 A. No, I don't think it is incorrect. I think there is 25 a major difference between a dotted line reporting 158 1 through a direct report, compared to a hard line report 2 thorough a direct report. 3 Q. Can you explain what that major difference is? 4 A. Yes. It's called pay and rations. If Mr Marsh reported 5 somewhere else, the somewhere else could either sack 6 him, could praise him, could give him more money, could 7 give him a bonus, could tell him exactly what to do or 8 not. In Miller's case, if he reported on a dotted line 9 basis, in my view, Miller would have to persuade Marsh 10 what to do. He couldn't tell him what to do. 11 Q. Were you aware that Tony Marsh was responsible for Head 12 of Security and also oversaw investigations? 13 A. Yes. 14 Q. You were aware, were you, that the investigations 15 included investigations into subpostmasters? 16 A. Of course. 17 Q. You said earlier in your evidence that, part of your 18 duties as a director, you would consider your 19 obligations to subpostmasters? 20 A. Yes. 21 Q. Did you feel unable to exercise any oversight over Tony 22 Marsh and the investigations that they were conducting 23 into subpostmasters? 24 A. No. I certainly didn't because, in practice, some of 25 the oversight that one could exert was purely a matter 159 1 of personality. However, this is another case where 2 there is clear responsibility inter Group and it's 3 another case where that confusion of reporting lines was 4 an important aspect of how one did or didn't manage Post 5 Office Limited. 6 Q. Did that formal reporting line actually prevent you or 7 the Board from overseeing what the Investigations 8 Department were doing? 9 A. No, I don't think it did in this case. 10 Q. Can we bring back up the previous document, please, 11 POL00021483, and if we could turn to page 8, please, to 12 the bottom, please. Here it says: 13 "Tony Marsh presented the security paper to the 14 Board on behalf of David Miller." 15 Can you recall why Mr Marsh presented it on behalf 16 of David Miller? 17 A. I don't recall but I would guess that it was thought 18 that Marsh would have had closer hands-on knowledge of 19 the issue that we were going to discuss. 20 Q. Was there any reason why, at any other Board meeting the 21 board couldn't have called Tony Marsh to present and 22 give a paper? 23 A. No. I'm thinking now but I'm not sure at all about 24 this. I think that we'd started to have the idea that 25 Marsh would report twice a year to us. But, I'm sorry, 160 1 I don't know that for a fact because it was right 2 towards the end of my tenure. 3 Q. What reason was there for Tony Marsh not to report 4 directly to the Board? 5 A. There wasn't any reason for him not to report. 6 Q. Why didn't you ask Tony Marsh to report to the Board 7 more often? 8 A. Two reasons, I think. I think corporate governance and 9 the way in which the Board operated was a growing thing 10 that, remember, started from nothing and had to go to 11 somewhere, and so perhaps we just weren't on the subject 12 fast enough. That could be one reason. The other 13 reason perhaps was a simple thing, that this Board was 14 weighed down with things that it had to deal with and it 15 was very hard work. So putting more on the Board agenda 16 every time would have been difficult. 17 Q. Is that the case, that the Board was focused on solvency 18 and it wasn't focused on prosecutions of subpostmasters? 19 A. It certainly had more focus on solvency than it did on 20 prosecutions, that's for sure. 21 Q. What focus did it have on prosecutions? 22 A. Not a high level. 23 Q. Can you recall a time when the prosecution of 24 subpostmasters were discussed on the Board? 25 A. No. 161 1 Q. Why do you think that is? 2 A. I think I've just given the reasons why that is. 3 Q. Do you think that's a failing of the Board's part? 4 A. No, I don't. 5 Q. Why? 6 A. Because you have to put yourself in that time. I can 7 see why it should have done now but it didn't then. 8 Q. Can we turn to POL00166566, please. This is an email 9 from Tony Marsh on 17 October 2003 to a large number of 10 staff. If we go to the next page, please, the 11 attachment is the "Security team [organisation] v4": 12 "Dear Colleague 13 "As you will be aware from recent communications 14 from both the Chief Executive, David Mills and the 15 Personnel Director, Ian Anderson, Post Office Limited 16 must make further headcount reductions to support Royal 17 Mail Group in its drive back to sustainable 18 profitability." 19 Were you and Post Office Limited responsible for the 20 Security Department's headcount? 21 A. Of course. 22 Q. Why did you then feel that there wasn't a more formal 23 reporting line to you? 24 A. I don't think the two things are the same. I had the 25 ability to instruct any executive to reduce their 162 1 headcount without the question of reporting lines. 2 Q. So, is your evidence, that you had the ability to give 3 Mr Marsh instructions to reduce headcount? 4 A. Yes, it is, but he also, of course, could always have 5 overridden me and simply gone back to Royal Mail Group 6 and said, "He's asking me to do this. That's not fair, 7 is it?" 8 Q. Could we go over the page, please. You see there's 9 a discussion of a "Security Team Lead and I examining 10 a number of ways" -- sorry, under "Options": 11 "... came to the conclusion that the structure could 12 be further streamlined in the following ways ..." 13 It refers to internal and external crime functions, 14 et cetera. Were you involved in the detail of changes 15 to the Security Department? 16 A. No, not at all. 17 MR STEVENS: Sir, I am looking at the time, I am not 18 finished but I think we should take a five-minute break. 19 I appreciate that might run us over slightly but, if we 20 could do that, I'd be grateful. 21 SIR WYN WILLIAMS: Right. Of course. 22 THE WITNESS: I'm okay. 23 MR STEVENS: Sorry? 24 THE WITNESS: I'm okay. 25 MR STEVENS: You're okay, if we may carry on -- 163 1 THE WITNESS: Yes, please. 2 MR STEVENS: In which case, sir, I will continue. 3 SIR WYN WILLIAMS: Yes. 4 MR STEVENS: Please can we turn to POL00021485. Could we 5 turn to page 13, please. There's an entry under "Human 6 Resources" here. Do we take it to mean, because it's 7 Human Resources, this is referring to Post Office 8 Limited's workforce? 9 A. Yes. 10 Q. It states that: 11 "The Board agreed that in situations where fraud had 12 been perpetrated against the Company ..." 13 Pausing there, because it is in Human Resources, is 14 that referring to fraud perpetrated by the workforce 15 against the company? 16 A. I'm sorry, I don't know. 17 Q. Reading the Board minutes, with your experience, acting 18 as Chief Executive, what would your reading of them be? 19 A. I think that it's saying we'd better get on more quickly 20 in making recovery against those persons within the 21 company that have tried to defraud us. 22 Q. So the workforce defrauding the company? 23 A. Yes. 24 Q. That would include subpostmasters? 25 A. Yes. 164 1 Q. It says: 2 "... the appropriate civil orders will be used 3 immediately and in advance of any criminal proceedings." 4 Is that referring to the use of freezing orders? 5 A. I don't know. I'm sorry. 6 Q. You can't recall the conversation on -- 7 A. No. 8 Q. Do you recall if the Board there would have discussed 9 the fact that Post Office Limited were advancing 10 criminal proceedings? 11 A. If they were in advance of criminal -- 12 Q. No, would the Board have discussed that Post Office 13 Limited was advancing criminal proceedings? 14 A. No, they wouldn't have done. 15 Q. Please can we turn to POL00021486. This a Board meeting 16 on 15 December 2004, at which you're in attendance. 17 Could we turn, please, to page 7. 18 I'm terribly sorry, page 6 first, please, right at 19 the bottom. This is referring to the Risk and 20 Compliance Committee: 21 "Peter Corbett provided a short presentation to 22 highlight the work of the newly formed Risk and 23 Compliance Committee." 24 Do you recall the discussion on this? 25 A. Very much so, yes. Yes, I was pleased that it was being 165 1 formed. 2 Q. From your recollection, what was the Risk and Compliance 3 Committee there to oversee? 4 A. Well, initially, all aspects of risk and compliance that 5 were identified as being -- where we had a risk in the 6 first place and where there was any likelihood of us not 7 being compliant with regulatory directives. 8 Q. As I understand it, this was the introduction of the 9 only subcommittee of the Post Office Limited Board; is 10 that right? 11 A. Yes. 12 Q. So this was quite a significant step in Post Office 13 Limited's -- 14 A. Very important. It was the step of the Board growing up 15 into what it needed to be. 16 Q. If we turn the page, please, to (c), it says: 17 "The scope of its activity included audit compliance 18 and legal issues; 19 "Its primary aim was to ensure the service and 20 conformance elements of the business were working 21 together properly. Rod Ismay ... Lynn Hobbs ... and 22 Tony Marsh ..." 23 It says: 24 "The next quarterly meeting would be held on 25 5 January 2005 to discuss branch control, vital few 166 1 controls, audit reports anti-money laundering measures, 2 crime and fraud and the work of the Group Audit 3 Committee." 4 At this discussion, what was said about the Risk and 5 Compliance Committee's role in respect of prosecutions 6 made against subpostmasters? 7 A. At this Board meeting, nothing would have been said. 8 This was a board meeting announcing the formation of 9 this committee having -- and outlining broadly what it 10 was going to do. 11 Q. At the time, did you consider yourself the risk 12 associated with Post Office Limited's involvement in 13 prosecutions? 14 A. No, I didn't. 15 Q. Why not? 16 A. Because I was too busy doing other things but I should 17 have done. 18 Q. What do you think those risks were; with hindsight, what 19 do you think the risks were? 20 A. Of pursuing prosecutions? 21 Q. Yes. 22 A. Being wrong. 23 Q. Do you think there were risks associated with the 24 disclosure of documents and Post Office Limited's 25 failure to disclose documents? 167 1 A. I'm sure that there were many, many risks associated 2 with those prosecutions, as we've now discovered, of 3 course. At the time, I personally didn't identify those 4 risks and I wish I had have done -- 5 Q. Was there anyone else -- let's start with Post Office 6 Limited -- who you think should have identified those 7 risks. 8 A. I'm very surprised, in a sense, that the people dealing 9 with the investigations, especially those people in 10 Group Legal, had not come to terms with the idea that 11 these things that were happening could harm us. 12 Q. What things that were happening? 13 A. Well, the non-disclosure of certain facts to litigants. 14 Q. Well, let's start on the Post Office Limited Board. Was 15 there anyone else you think should have identified the 16 risks arising from the investigation and prosecution of 17 offences against subpostmasters? 18 A. I don't know and I don't know because I'm trying to 19 think at that time. 20 Q. In practice, who was overseeing the investigation and 21 Security Department, if it wasn't the Board of Post 22 Office Limited? 23 A. I can't truly tell you. I think it moved around. 24 Q. Do you think that it's a failing of corporate governance 25 that you can't tell who was responsible for the 168 1 investigation of the Security Department? 2 A. Yes. 3 Q. Who do you think is responsible for that failing? 4 A. Well, me, obviously. 5 MR STEVENS: Sir, I'm conscious of time. There are, 6 I believe, some Core Participant questions, Mr Stein and 7 Mr Moloney. 8 SIR WYN WILLIAMS: Right. Does that mean you're going to 9 offer the floor to them, Mr Stevens? 10 MR STEVENS: Yes, I should have said I'm conscious of time 11 and will offer the floor. 12 SIR WYN WILLIAMS: Right. Then I'm sure that the 15 minutes 13 which they normally afford themselves between them, no 14 more about 15 minutes on this occasion. 15 MR STEVENS: I think Mr Moloney says two or three minutes. 16 MR STEIN: (Microphone off) 17 MR MOLONEY: I can finish my question in two or three 18 minutes, sir. 19 MR STEIN: (Microphone off) 20 SIR WYN WILLIAMS: First of all, Mr Mills, are you happy to 21 carry on for another ten minutes? 22 THE WITNESS: Yes, Chair. 23 SIR WYN WILLIAMS: Fine. Off we go, then. 24 Questioned by MR MOLONEY 25 MR MOLONEY: Mr Mills, you said your primary aim when you 169 1 took over at Post Office was to "keep this thing 2 afloat"; is that right? 3 A. Correct. 4 Q. Yeah. If you couldn't turn the business around, was 5 there any danger that Government would accept that the 6 business could not be kept afloat in its then current 7 form? 8 A. It seemed as if there was. There was no willingness on 9 the part of Government to give ironclad guarantees to 10 creditors for us. 11 Q. Was everybody in senior management and on the Board 12 aware of that potential? 13 A. Definitely. 14 Q. Horizon was utterly integral to the operation of Post 15 Office at this time, wasn't it? 16 A. Crucial. 17 Q. Business critical might be another description for it as 18 well? 19 A. Definitely. 20 Q. In reality -- and I don't seek to in any way challenge 21 what you knew and didn't know and what you've said about 22 that; do you understand me, Mr Mills? 23 A. Yes. 24 Q. In reality at that time, having spent many, many 25 millions of pounds on the Horizon system, if Post Office 170 1 had been forced to go back to the drawing board on its 2 online accounting system, the business was in real 3 trouble, wasn't it? 4 A. I'm sorry, could you repeat? 5 Q. The business was in real trouble? 6 A. Definitely. Crisis mode it would have been in. 7 MR MOLONEY: Thank you very much, Mr Mills. 8 Questioned by MR STEIN 9 MR STEIN: Mr Mills, I've got just a couple of questions in 10 relation to your knowledge at the time. 11 You've stressed to Mr Stevens in answers to his 12 questions that you tried to work out what you knew at 13 the time, okay? 14 I'm going to take you to a document which is 15 RLIT0000195. Thank you. 16 Now, Mr Mills, you should be able to see that we've 17 got a photograph of you; is that correct? 18 A. Yes, dreadful, isn't it? 19 Q. We can see this is an article that goes back some time, 20 in the copy I have, which, I hope you'll take from me, 21 is dated March 2005. This is an article from The 22 SubPostmaster Magazine? 23 A. Yes, I remember it well. 24 Q. All right, okay. So here what we've got is this: we see 25 the heading, which is "Improvements to the Post Office 171 1 Horizon Network", and you're saying at the beginning of 2 the article: 3 "In August last year, I promised to respond to 4 issues you raised about the reliability of the Post 5 Office Horizon banking services." 6 All right? So that's what you're doing. 7 A. Yes. 8 Q. So, putting this together, we can see at this time that 9 you are trying to set out some reassurance to the 10 branches regarding the operation of the Horizon system. 11 Is that a fair description of what you're doing in this 12 article? 13 A. Yes -- 14 Q. Okay. 15 A. -- and I was also trying to prove accountability that -- 16 what I'd said I'd do. 17 Q. Right. So can we then look at the third column going 18 across. You see the one that starts "In reality", and 19 I'll read that out: 20 "In reality Horizon provides a reliable service for 21 the majority of our branches, most of the time. About 22 99.7% of the time in fact. Having said that, I know 23 that if your branch is affected by a loss of service it 24 is still significant and, since August we've been 25 working with our suppliers to find ways of improving the 172 1 overall level of service, while keeping our technology 2 costs under control." 3 Okay, you see that? 4 A. Yes. 5 Q. All right. So you understood at this time, in March 6 2005, that there had been issues raised concerning the 7 reliability of the Horizon system; is that correct? 8 A. I certainly did, yes. 9 Q. Right. Were you aware at this time, in March 2005, that 10 Horizon data was being used to support prosecutions of 11 subpostmasters? 12 A. No, I was not. 13 Q. Right. Now, let's go a little bit further down on the 14 second column. I don't want to miss out anything you 15 find important. You'll see there are two bullet points 16 that refer to the faster resolution of BT faults, okay? 17 Now, the first one refers to Post Office owned 18 telephone lines and then it goes on to the second bullet 19 point -- I'll take my glasses off because my copy is 20 very small, it's better on the screen. 21 A. It's bad, isn't it? 22 Q. "Working with our suppliers, we have identified number 23 of improvements in the way we manage network faults, 24 which combined with the improved BT service level, will 25 result in faster problem resolution for the majority of 173 1 problems. (We'll know how much faster when we've 2 finished reviewing and modifying our existing fault 3 handling processes with our suppliers.)" 4 All right, so March 2005, were you aware that there 5 was a four-line system of support for faults within the 6 Horizon system operated by Fujitsu? 7 A. No, I wasn't. 8 Q. Okay. Now, how, therefore, when writing this article -- 9 sorry, what were you referring to as regards the 10 management of network faults that you refer to within 11 this article? 12 A. An amazing number of the faults that subpostmasters were 13 recording were, first of all, because they had bad 14 telephone lines that didn't stay up all the time and 15 that hiccupped and, to get them fixed, you actually 16 needed a man in a van and a shovel, and men in vans and 17 shovels don't turn up just (indicated) like that. You 18 have to put your hand up and say to BT, "Would you 19 please come", and in three days time, hopefully, they 20 turn up. So getting our hands round BT's neck and 21 trying to ring it was part of the problem. 22 Also, the kit that was put into sub -- post offices, 23 I'm sorry, was not one piece of kit, it was a connection 24 of pieces of kit and pieces of kit don't always work, 25 and the connections don't always work, and 174 1 subpostmasters pull them out and they don't know where 2 to put them back in, and there was whole variety of 3 things that were nothing whatsoever to do with the 4 software. 5 These were real, practical day-to-day hardware 6 problems that we weren't getting to fast enough because 7 we had 17,500 branches that were phoning up and we had 8 to get round to. 9 So I was referring to a lot of that hardware 10 solution and not, actually, software solutions because, 11 very often, it was the hardware that was wrong. 12 Q. Right. So if we put this together, what we've got is 13 you putting -- you setting out in an article, 14 improvements that are going to be considered for the 15 Horizon network. You're referring to difficulties with 16 the BT line, yes? 17 A. Yes. 18 Q. You're referring to improvement with the BT service 19 level in the second on the two bullet points? 20 A. Yes. 21 Q. You are also managing network faults and, there, you 22 think you're referring to hardware problems? 23 A. Potentially, yes. 24 Q. Yes. Now, at the time when this article is being 25 written, where did you get the information from, so that 175 1 you can write this and actually give out this 2 reassurance? 3 A. Well, it was just something that was so well known that 4 it wasn't something I had to go round and find out. 5 Remember, I'm going round talking to subpostmasters like 6 very, very, very regularly. We were -- we talked to 7 thousands of subpostmasters in any one year, on 8 a regular basis. All of the Executive Team did that. 9 We had regular, multiple meetings with subpostmasters. 10 So they just tell us. 11 Q. So your system of finding out the contents for this 12 article for The SubPostmaster Magazine is having 13 a natter with a few people when you're wandering around 14 doing your job; is that about right? 15 A. No, I certainly didn't say that. 16 Q. That seems to be what you're saying, so let's try and 17 pin it down? 18 A. No, it wasn't what I was saying. 19 Q. Did you speak to the IT Team, Mr Mills? 20 A. Did I speak to the IT team? 21 Q. Yes. 22 A. The man who ran the IT reported to me on a very regular 23 basis. I had the all of the Executive Team reporting to 24 me at 9.00 every Monday morning. We had regular 25 conversations in the diary with the National Federation 176 1 of SubPostmasters. We talked to the CWU regularly. 2 These are not things -- the tittle-tattle that we were 3 talking -- dodging in and out about. These are major 4 presentations and conversations with them. We put all 5 of them together in a conference. 6 Q. Right. Did you speak to the IT team so that you 7 understood that what you were putting in an article 8 reassuring branches about the network system of Horizon 9 was correct? Did you speak to them? Did you get 10 a report from them? Did you get advice from them in 11 writing so that you can understand whether there were or 12 not faults within the Horizon system? 13 A. No, I, on a normal basis of every corporate 14 organisation, had regular and direct conversations with 15 my IT Director, who had delegated authority to run the 16 IT team. 17 Q. I see. Now you've been asked a number of questions by 18 Mr Stevens in relation to the Coyne Report and you've 19 explained to the Inquiry that you don't remember -- 20 you're either saying you haven't seen it or you're 21 saying you don't remember having read it before giving 22 evidence today; is that right? 23 A. Um -- 24 Q. Which? Don't remember it or haven't seen it? 25 A. Well, I don't remember it. 177 1 Q. All right. 2 A. But -- I am sorry but, to be correct, all of the 3 information that the Inquiry has sent me I've read. 4 Q. Okay. Now, you know enough about the Coyne Report to 5 know that it merited a point in a risk register to say 6 that there were some difficulties with the Horizon 7 system. 8 A. Correct. 9 Q. What you've generally said is, well, £1 million was 10 a lot of money and, therefore, that probably was the 11 thing you put in your notebook, yeah? 12 A. Yes, I wasn't quite as flippant as that but, yes, that's 13 what I'm saying. 14 Q. All right. Now, when you were getting the information 15 you needed for this particular article in the 16 SubPostmaster Magazine, to reassurance branches about 17 the Horizon system, did any of the regular IT chats that 18 you had with your IT people tell you "Well, hang on, 19 we've also had this Coyne Report that says there are 20 a number of things going wrong with the system"? 21 A. No. If I was going to put something out like this to 22 the network, it would almost certainly have been copied 23 to every director by the Communications Team for their 24 comments. They would have come back, been incorporated 25 by the Communications Team, I'd have re-looked at it and 178 1 said "Yeah, that's okay, let it go". 2 Q. Had you been told by any of the people in the IT team 3 within POL that one of the problems identified in the 4 Coyne Report is that, when someone phones the helpline, 5 they get told to switch off the machine and then that 6 doesn't really help solve software problems; had you 7 been told that at any stage, Mr Mills? 8 A. No. 9 Q. Right. 10 A. If you mean had I been told that they were asked to 11 reboot the machine, yes. 12 Q. Right, and were you told that, by doing so, that can 13 mask problems within the software of the Horizon system? 14 A. Definitely not. 15 Q. Right. Okay. So let's pull this all together. It 16 doesn't seem, from your evidence, Mr Mills, that you 17 were told about the Coyne Report and the significance of 18 it; is that correct? 19 A. Correct. 20 Q. When you come to write an article for the SubPostmaster 21 Magazine, it doesn't seem, from your evidence, that that 22 therefore achieved a note in what you were then 23 explaining to the subpostmasters; is that also correct? 24 A. Correct. 25 Q. I see. Whose fault was that: yours or other people 179 1 within POL? 2 A. I don't think it was anybody's fault. 3 Q. You don't regard problems with the helpline, where 4 people are being told to turn it off and then turn it 5 back on again, causing software problems, you don't 6 regarding that as being an issue that perhaps you should 7 have been aware of, Mr Mills? 8 A. I said I was aware of the helpline asking subpostmasters 9 to reboot the machine. 10 Q. Let's try and take that on, then. Did you perhaps say 11 to anybody that, if these subpostmasters are being told 12 to reboot, does that cause any issues; did you raise had 13 as a query, Mr Mills? 14 A. I raised many queries about Horizon on a daily basis. 15 The fact that they were asking people to reboot 16 something may -- it would have been trivial in my daily 17 life. Everyone was rebooting machines everywhere for 18 every reason. They just used that as a solution to 19 a problem. So, no, that wouldn't have caused great 20 issues in my mind. Of much more importance was how did 21 we replace this system in five years' time? 22 Q. More important than the prosecution of small businesses; 23 more important than the people that are in branches 24 going to prison; more important than people losing their 25 livelihoods, Mr Mills? 180 1 A. I didn't say that; you said that. 2 Q. What do you say now? Which is more important, what I've 3 just said, which is people's lives being devastated and 4 destroyed or what you've said, which is well, we had to 5 keep an eye on the bottom line; which is more important 6 to you now, Mr Mills? 7 A. First of all, I didn't say, well, we had to keep an eye 8 on the bottom line and, secondly, obviously, the 9 devastation to the lives of these poor postmasters was 10 more important than anything else and should never ever 11 have happened. 12 SIR WYN WILLIAMS: Right, thank you, Mr Stein. 13 Just following on from that, really, Mr Mills. I am 14 not for a minute going to suggest that rescuing the 15 Royal Mail Group and/or the Post Office from insolvency 16 was not critically important, I follow that. All right? 17 But exercising the function of prosecuting people has 18 various consequences and, reduced to its simplest, it 19 means that you take people to court and that, in certain 20 circumstances, very severe sanctions are imposed upon 21 them and it does seem to me, I have to say, that that is 22 something which the Board of Directors of a major 23 company should have very much towards the forefront of 24 its mind, regardless of what other problems it faces; is 25 that fair? 181 1 A. Yes. 2 SIR WYN WILLIAMS: Right. Thank you very much. Thank you 3 for coming to give evidence after making a witness 4 statement. I'm grateful for your participation in the 5 Inquiry. 6 We'll adjourn now until tomorrow morning at 10.00. 7 MR STEVENS: Yes, sir. We have Jon Longman, who is 8 an adjourned Phase 4 witness, and Allan Leighton. 9 SIR WYN WILLIAMS: Is Mr Longman in person or remote, 10 Mr Stevens? 11 MR STEVENS: I believe it's remote, sir. 12 SIR WYN WILLIAMS: Yeah, that's what I thought. 13 All right then, 10.00 tomorrow morning. 14 (4.31 pm) 15 (The hearing adjourned until 10.00 am the following day) 16 17 18 19 20 21 22 23 24 25 182 I N D E X Questioned by MS PRICE ........................1 Questioned by MR STEIN .......................90 Questioned by MR MOLONEY .....................99 Questioned by MS PAGE .......................104 DAVID JOHN MILLS (sworn) ....................106 Questioned by MR STEVENS ....................106 Questioned by MR MOLONEY ....................169 Questioned by MR STEIN ......................171 183