1 Wednesday 12 October 2022 2 (10.00 am) 3 Opening statement by MR BEER (continued) 4 MR BEER: I'm afraid we can't hear you at the moment. 5 SIR WYN WILLIAMS: I think you can now, I've just unmuted 6 myself. 7 MR BEER: Thank you very much, sir, good morning to you. 8 I know that your assessors both join online as well. 9 SIR WYN WILLIAMS: That's right, Mr Beer, and I'm also 10 pleased to say that I have a live transcription feed so 11 that I am well equipped. 12 MR BEER: Thank you, sir. I concluded yesterday afternoon 13 by outlining a menu of four issues relating to training 14 that I was about to cover. Can I turn to the first of 15 them, the training need analysis and baseline 16 competencies. 17 You will in due course be referred to a Training 18 Needs Analysis for the Horizon rollout, Fujitsu, 19 FUJ00001276. It was prepared in March 1997 by Stuart 20 Kearns of Peritas. Now, the Inquiry did approach 21 Mr Kearns for his involvement with the Horizon project 22 and he was keen to assist. However, I'm saddened to say 23 that Mr Kearns has recently passed away, so the Inquiry 24 will not hear evidence from him. 25 The Training Needs Analysis was an important 1 1 document that appeared to inform the design of the 2 training programme thereafter. In particular, we will 3 investigate how this analysis was carried out and how it 4 was built on to develop the training programme. In 5 particular, you will wish to investigate the views of 6 the Post Office on the findings of the Training Needs 7 Analysis. The Post Office carried out its own 8 assessment of baseline competences after Peritas had 9 completed the Training Needs Analysis. 10 Can we bring up, please, POL00039748. This is 11 a memorandum dated January 1999 from Kathryn Cook to 12 various people in the Post Office. 13 If we can zoom in on the bottom three paragraphs, 14 please -- apparently not. 15 Thank you. In it, she refers to a developing debate 16 within the business about concerns over the entry level 17 of competence of those attending Horizon training 18 events, ie that it may be low enough to prejudice their 19 ability to make the most of ICL's training. In the 20 memorandum, Ms Cook goes on to refer to the 21 Post Office's work on improving conformance, to which 22 I referred yesterday. 23 You will, in due course, hear evidence that Post 24 Office went on to establish a Horizon Training 25 Competencies Development Group. We will investigate the 2 1 findings of that group and, importantly, what effect, if 2 any, those findings had on the overall programme. That 3 can be taken down. 4 The second issue, the adequacy of the training 5 programme. The issue is whether the training programme 6 was adequate in terms of the time allocated to it and 7 the content of it. I hope it's uncontroversial to say 8 that the effectiveness of training ought to be evaluated 9 by the extent to which the trainees are able to perform 10 the object of the training programme after its delivery. 11 Although that statement is, I hope, uncontroversial, 12 it doesn't grapple with a couple of other issues. 13 Firstly, it doesn't include a definition of the minimum 14 standard to which the trainees should be trained. In 15 other words, the definition of competence. It is 16 secondly quiet as to the scope of the training itself, 17 what will and will not be covered. So, in due course, 18 you will need to consider and make findings on the 19 minimum levels of competence that were necessary to use 20 the Horizon System in order to assess the adequacy of 21 the training provided. 22 The evidence going to that issue will be heard 23 across both Phases 2 and 3 and, in respect of the 24 adequacy of the training programme, I would at this 25 stage only draw to your attention two concerns that were 3 1 raised during the rollout of training: the first 2 concerns the amount of content that was covered in the 3 classroom sessions; and the second concerns training on 4 balancing. 5 So as to the time available for training, can we 6 bring up, please, POL00036992. You can see from the 7 cover this is "Training Workbook 1". This document 8 contains a series of ten training workbooks provided as 9 a part of the training programme. 10 They were not intended, the ten workbooks, to be 11 exhaustive, and if we turn ahead to page 6, no need to 12 do so right now, in the penultimate paragraph the 13 document says that it was not intended to cover every 14 transaction and, in that respect, the user was referred 15 to a separate Horizon user guide. You will likely, sir, 16 be referred to the Horizon System User Guide at various 17 points in the evidence in the Inquiry. 18 At this stage, I would simply refer on the 19 transcript to POL00090227. That was a version of the 20 User Guide in circulation in July 2000. It provided 21 instructions on how to use the Horizon System. 22 That document, the User Guide, runs to 819 pages. 23 The reason why I mention these documents together, the 24 ten training workbooks and the 819-page User Guide, is 25 to give an indication as to the scope of work that 4 1 subpostmasters, counter managers and assistants could be 2 expected to carry out once up and running on the Horizon 3 System. 4 On the agreed training -- 5 SIR WYN WILLIAMS: Can I just stop you for a second. The 6 document that you put up hasn't been taken down from my 7 screen. So I'd like to see you as well. 8 MR BEER: Thank you, sir. 9 SIR WYN WILLIAMS: That's fine now, Mr Beer. 10 MR BEER: Ah, good. 11 On the agreed training scheme, this material would 12 be covered by a user awareness event in the weeks 13 leading up to a migration, and a user training course in 14 the days before it. The user training course would be 15 a day and a half for subpostmasters, a day for counter 16 assistants. You will hear that this was supplemented by 17 written materials, supplemented by the Horizon helpdesk 18 and supplemented by the Post Office's own support staff. 19 However, the training workbooks and the User Guide 20 give a fair indication of the amount of work the 21 training programme needed to address prior to migration. 22 You will want, in due course, to consider whether there 23 was sufficient time to cover all of this material in the 24 time that I've mentioned. 25 The second point I referred to was the adequacy of 5 1 training in relation to balancing. This issue, 2 balancing, became a particularly contentious one because 3 the Post Office raised an Acceptance Incident in 1999 4 regarding the quality of training. 5 Can we look, please, at POL00028357. 6 If we can see in the centre under "Description of 7 Incident": 8 "Receipts and payments do not equal on the cash 9 account. The receipts total is different from the 10 payments total when printing off the cash account. This 11 was originally thought to be a migration problem only 12 however the fault has now been replicated on a cash 13 account following the migration week." 14 Then if we can turn to page 4 of this document, and 15 again look at incident 218: 16 "The Managers Training Course is not acceptable due 17 to deficiencies in the accounting modules. In the live 18 environment the training given did not equip the users 19 to perform the completion of office cash accounts. This 20 is a ['basic', I think that's meant to read] 21 [Post Office Counters] function that is central to 22 running and accounting for the [Post Office Counters] 23 network." 24 So, in essence, the position was that the programme 25 had failed properly to train subpostmasters and counter 6 1 managers to carry out accounting tasks such as 2 balancing, notwithstanding changes already made. 3 Can we look at page 7 of this document, please. 4 Thank you. This is a letter from the Post Office's 5 Bruce McNiven, director of the Horizon programme, to 6 ICL Pathway's John Dicks. It is dated 10 August 1999. 7 Mr McNiven sets out that the Post Office remained of the 8 view that the training solution was inadequate, and this 9 is in August 1999. 10 Notably, and one can see this from the second 11 paragraph, the Post Office was concerned that it had to 12 rely on its own HFSO resource to supplement training. 13 "HFSO" stands for Horizon Field Support Officers, who 14 were deployed by the Post Office to branches to assist 15 with the migration to Legacy Horizon. 16 Acceptance Incident 218, to which I've just referred 17 you, was subsequently passed through workshops and 18 eventually resolved. This is an issue that you will 19 wish to investigate with care. First, we will ask you 20 to consider whether the Post Office's concerns about the 21 adequacy of training on balancing were legitimate. If 22 they were legitimate, secondly, we will ask you to 23 consider whether they were adequately resolved. You 24 will wish to investigate whether the final training 25 provided to subpostmasters on the balancing issue was 7 1 adequate. 2 Of course, you have already heard evidence from 3 a number of subpostmasters on the quality of the 4 training that they received as part your human impact 5 hearings. Whilst that evidence will not be repeated in 6 the Phase 3 hearings, it will, of course, be weighed in 7 your mind when making findings on the issues of 8 training. 9 This then leads to the third set of issues that 10 arise from training, namely the collection and use of 11 feedback. You will hear evidence in due course on how 12 feedback was collected on the training programme. The 13 documents suggest that training courses were tested in 14 dry runs. Once the programme was rolled out, 15 ICL Pathway had contractual obligations to obtain 16 feedback from the trainees. 17 The feedback collected for the training course was 18 important for at least two reasons: firstly, the 19 feedback could and should feed into the parties' 20 assessment of the effectiveness of the training 21 programme. The identification of any perceived 22 deficiencies in the training programme was important. 23 It would enable the parties to investigate whether there 24 was a deficiency. If there was, they could then 25 implement changes to the training programme to rectify 8 1 the deficiency. 2 The second reason why feedback was important was 3 because the results were themselves used as a measurable 4 key performance indicator, KPI to benchmark ICL 5 Pathway's delivery of the training program. 6 Can we turn up, please, POL00028212 and can we turn, 7 please, to page 85. 8 By way of reminder, sir, this is schedule A15 of the 9 agreement between Post Office and ICL Pathway, which set 10 out the former's contractual requirements. 11 Paragraph 1.165.7 of the agreement sets out that the 12 training program had to receive a: 13 "... positive rating of not less than 95% as 14 a result of a training measurement questionnaire." 15 Therefore it was, of course, in ICL Pathway's 16 interests for the results of the feedback to be 17 positive. 18 You will need to explore whether feedback was 19 adequately collected to identify any concerns about the 20 training program. Accordingly, you will wish to hear 21 evidence on the different methods that Peritas and 22 ICL Pathway adopted to obtain feedback and to what 23 extent these led to changes in the training programme. 24 That can be taken down. Thank you. 25 The fourth set of issues in respect of training 9 1 that I wish to touch on now is that of testing 2 competence. This is again important for at least two 3 reasons: firstly, it is obviously important to test the 4 competence of trainees in order to determine whether 5 they are able to use the system. In this respect, we 6 would submit that the competence test should be a fair 7 assessment of whether the trainee can use the system to 8 carry out the functions of Horizon using the written 9 information that would then be available to them. 10 Again, competence was again a key performance 11 indicator to measure ICL Pathway's performance. I'm not 12 going to turn it up again, but at paragraph 165.14 of 13 the schedule that I've just shown you, it states that 14 ICL Pathway were to ensure that 95 per cent of trainees 15 completed training to an agreed level of competence. As 16 such, it was in ICL Pathway's interests for 17 subpostmasters to pass the competence test. 18 You will wish, therefore, to hear evidence on how 19 competence was tested and the success rate of trainees. 20 I would say at this point that a high pass rate of the 21 competence test can show at least one of two things. 22 First, it could show that the training course was 23 functioning properly or, secondly, it could show that 24 the competence test was too easy. 25 Turning, then, to Post Office training. 10 1 Following the national rollout, the Post Office took 2 over responsibility for training the network. The Post 3 Office has provided a significant number of documents to 4 evidence the designs for training courses and work 5 materials provided. You will be referred to the 6 pertinent documentation during the Phase 3 hearings so 7 that you can examine the content of the training. The 8 documentation suggests that training courses were 9 designed to train new joiners to Post Office, part of 10 which included training on Horizon. The design of these 11 courses changed over the years and, in summary, the Post 12 Office itself summarised the training it says it 13 provided to subpostmasters as follows in a letter to the 14 Inquiry. That's dated 14 April 2022. 15 They said, first, from 2001 to 2002, there was 16 classroom-based learning, followed by 10 or 11 days of 17 onsite training, followed by a further day of balancing 18 support at the end of a trading period. 19 From 2003 to 2006, there were between five and 20 ten days of classroom-based training, with between "five 21 and ten days of onsite support ... depending on whether 22 the classroom training was attended". 23 Thirdly, the Post Office said that, from 2005 to the 24 rollout of Horizon Online, there were either five, eight 25 or ten days of training on various modules, followed by 11 1 six days of onsite training and support with a further 2 one-day follow up of balance support. 3 From 2007, the Post Office says that it introduced 4 follow-up telephone calls at intervals of one month and 5 six months after a branch was taken over by a new 6 subpostmaster, with a day-long site visit after 7 three months after the branch was taken over. 8 Then, lastly, a new suite of training was provided 9 for Horizon Online in 2010, following a modular 10 approach. 11 You've already heard evidence from some 12 subpostmasters, including Nichola Arch, Pauline Coates, 13 Pamela Lock, Tahir Mahmood and Chris Trousdale, who were 14 very critical of the training that they received or the 15 lack of it. I have previously raised that one of the 16 issues you must determine is what training the 17 subpostmasters, in fact, received. It seems you can 18 expect a conflict of evidence on the training that 19 provided by the Post Office over the year, which 20 conflict may require resolution. 21 In readiness for the Phase 3 hearings, the Inquiry 22 has sent requests for witness statements under Rule 9 to 23 a number of people it has identified as being involved 24 in the Post Office's training programme. These range 25 from the trainers themselves to middle managers, as well 12 1 as to the senior management team. 2 We intend to call several witnesses from the Post 3 Office to speak to the issues that I have mentioned, to 4 enable you to make findings on what training was, in 5 fact, delivered to subpostmasters. 6 This, of course, is not the only issue to resolve 7 during this period. The same themes I identified in 8 respect of rollout training continue, including: how 9 were the baseline competences and training needs 10 analysed? Were subpostmasters given sufficient time for 11 training? Was the content adequate? How did the Post 12 Office collect feedback and what did it do with it? How 13 did the Post Office assess competence? 14 I would add one original point to this list which 15 arises from the different nature of the training project 16 for which the Post Office was responsible. The purpose 17 of the rollout training was to see that those in the 18 network were competent in using the Horizon System in 19 readiness for rollout. The Post Office did not have 20 a single block of training to roll out like ICL Pathway 21 but had to maintain the network by training the new 22 joiners. You will also wish to examine the extent to 23 which refresher training was available to 24 subpostmasters, who experienced difficulties operating 25 the Horizon IT System. 13 1 There is, therefore, a significant volume of 2 important issues to cover in respect of training, 3 despite it only taking up six paragraphs in our list of 4 issues. Of course, the issues on training can't be 5 considered in isolation. They must be considered 6 alongside the advice and assistance that was available 7 to subpostmasters, an issue to which I will now turn. 8 The issues that you're asked to determine in 9 relation of advice and assistance are found in section E 10 under the "Horizon IT System" heading the list of 11 issues. 12 The form of questions asked are very similar to 13 those in relation to training: what advice and 14 assistance was available to SPMs, managers and 15 assistants in relation to Horizon? Who provided the 16 advice and assistance and were they adequately 17 experienced and qualified to do so? Was the advice and 18 assistance available adequate? Did the advice and 19 assistance available change or improve over the years 20 and, if so, how? 21 Again, you will be asked to consider the current 22 arrangements for advice and assistance but that will be 23 considered as part of Phase 7. 24 The advice and assistance which you will consider 25 can be divided in two linked groups. One might be 14 1 described as a type of business support. This was 2 provided by the Post Office itself. This would clearly 3 go beyond Horizon but would also necessarily need to 4 cover the IT system as well. The other might be 5 described as technical support for Horizon, which was 6 provided by Fujitsu. These support services are 7 a central player to this Inquiry; relevant to several of 8 the broad themes you must consider. They clearly play 9 central roles in the identification and rectification of 10 bugs, errors and defects, to the oversight of Horizon 11 and Fujitsu's technical competence. Their work also fed 12 into the resolution of disputes, to audits and 13 investigations, to civil and criminal proceedings and to 14 the approach taken more generally to the scandal and to 15 redress. 16 The Inquiry has received extensive documentation 17 relevant to the advice and assistance issue. This 18 includes written information said to have been 19 distributed or made available to subpostmasters to 20 assist with operating Horizon. 21 You will be referred to this documentation during 22 the hearings and will wish to consider whether it 23 provided adequate support. You will also want to 24 investigate in evidence how such documentation was made 25 available to subpostmasters. This documentation also 15 1 covers extensive policies and procedures on how the 2 services provided advice and assistance were supposed to 3 operate. These documents change, sometimes frequently 4 and sometimes materially. So, in this opening, I will 5 summarise some of the key players within the support 6 service and refer you to some important documents within 7 the timeline. 8 This comes with two caveats. Firstly, you will, in 9 due course, be referred to many more documents, some of 10 which will be amended versions of the documents I'm 11 going to refer to today. It wouldn't be proportionate 12 or probably useful to go through all of those amended 13 documents in this opening. Secondly, you will hear 14 about the support services in more detail during the 15 hearings. You have already heard evidence from 16 subpostmasters on their experiences of the support 17 services. In due course, you will need to consider the 18 extent to which the support structure that's set out in 19 the documentation was, in fact, delivered to 20 subpostmasters. 21 So I will firstly briefly set out the support 22 services provided by the Post Office before turning to 23 Fujitsu and I'm going to spend significantly longer 24 explaining the support services provided by Fujitsu, 25 albeit this isn't an indication of relative importance. 16 1 The Fujitsu technical support services clearly go 2 centrally to the identification and rectification of 3 bugs, errors and defects. Moreover, the technical 4 nature of this topic means that more initial explanation 5 of it would be helpful. You will, in due course, hear 6 a significant amount of evidence on the advice and 7 assistance provided by the Post Office, and you will 8 need to consider carefully whether that was adequate. 9 So starting with the Post Office. 10 The Post Office has provided us with an extensive 11 amount of documentation, which it says was provided to 12 subpostmasters to support them using Horizon. These 13 range from updates to quick reference guides on various 14 transactions and processes. You will wish to consider 15 if these provided adequate advice and assistance, either 16 on their own or in conjunction with other support 17 services. 18 The Post Office operated a support network. You 19 will hear evidence of the work of field team advisers 20 and field team leaders. The Inquiry has sent Rule 9 21 requests to many involved throughout the tiers of 22 network support and we intend to call some of them to 23 give evidence. You will wish to investigate how the 24 people on the frontline of support were trained and kept 25 up-to-date on Horizon. 17 1 Moreover, you will hear about the Post Office's own 2 telephone support service, initially called the Network 3 Business Support Centre, or NBSC, now referred to as the 4 BSC. You will wish to investigate the same issues in 5 respect of the NBSC, which service has previously been 6 criticised in the evidence by subpostmasters. You will 7 wish to hear evidence on how the NBSC and the Fujitsu 8 support services operated together. 9 The Post Office and Fujitsu had agreed procedures in 10 place to define the relationship between the helpdesk 11 and the NBSC. You will wish to investigate how these 12 two telephone services operate and whether they 13 delivered a coherent and adequate service to 14 subpostmasters. 15 Can I now turn to examine Fujitsu support services. 16 During the Inquiry, you will be faced with a large 17 amount of documentation setting out the intended 18 processes and procedures for support services. 19 I reiterate that I only intend to show a very small 20 sample of these documents in the opening to give 21 an overview of the support services available and to 22 raise some issues that you will wish to consider 23 throughout. 24 For example, sir, can I ask to be brought up 25 FUJ00079865. Thank you. 18 1 This is a process definition for incident management 2 in 2000. It describes the process that ought to have 3 been followed if a subpostmaster experienced a technical 4 issue with Horizon and called for support. Can we turn 5 to page 5 of the document, please. 6 I'm just going to use this index to the document to 7 set out the incident management process. So first line 8 support was the subpostmasters initial point of contact, 9 and Fujitsu's gateway to the remainder of the support 10 service. This was carried out by the Horizon System 11 helpdesk later called the Horizon Service Desk. It 12 would seek to resolve basic queries and pass on those 13 that it couldn't rectify to the second line support. 14 The second line support for software was provided by 15 the System Management Centre, or SMC. This sought to 16 resolve technical problems itself and acted as 17 a gatekeeper and filter to third line support. The SMC 18 was also involved in identifying system events that 19 could indicate that a software problem had arisen. 20 There was also another layer of second line support for 21 hardware, which I don't cover in this opening. 22 Third line support was provided by four teams. The 23 System Service Centre, or SSC, was central to the 24 investigation and rectification of software problems in 25 Horizon. The Management Support Team or Management 19 1 Support Unit, MSU, monitored and managed reconciliation 2 errors. The Reference Data Team focused on errors in 3 the reference data on which Horizon relied. The 4 Operational Services Division provided third level 5 support to network and central system incidents. You 6 will hear evidence on all of these teams during the 7 Inquiry. I'm only going to cover the SSC and the MSU in 8 the opening. 9 Fourth line support involved development teams that 10 would make changes to the Horizon coding to resolve 11 identified bugs, errors and defects. 12 I will turn to cover these levels of support now but 13 it's important to note that these process designs 14 shifted over time. For example, a new process 15 definition was designed for the release of Horizon 16 Online. The cross-reference to that is FUJ00080027. 17 Equally, incident management was not the only line 18 of support. Fujitsu had a separate process of problem 19 management, as it was called, and we can see that 20 FUJ00079853. You will hear of these issues in full in 21 the course of the Phase 3 hearings. 22 So first line support, the Horizon Helpdesk or, as 23 it became known, the Horizon Service Desk. Fujitsu's 24 first line of support was the system helpdesk or the 25 service desk. Its functions were initially set out in 20 1 FUJ00080489, which I would ask to be displayed: 2 FUJ00080489. 3 If we can go to page 6 of the document, please. The 4 document describes the helpdesk as: 5 "... the single contact point for all technical 6 problems arising with the ICL Pathway operating domain." 7 It was the initial mouthpiece of Fujitsu's support 8 services and the gatekeeper to the higher lines of 9 technical assistance. This is summarised at page 7, 10 please -- just over the page -- under paragraph 3. If 11 we can look at the second paragraph of paragraph 3, 12 thank you, three lines in: 13 "The Horizon System Helpdesk staff will record 14 details of the issue or request by ascertaining 15 information from the customer regarding the nature and 16 impact of the problem, the helpdesk operator will be 17 able to resolve or diagnosis the problem during this 18 initial telephone conversation. Should the operator 19 fail to resolve the problem at this time, he will route 20 the incident onto a second line support unit and inform 21 the customers of the next expected action." 22 You will be referred to documentation that shows 23 that a developing role of this element of first line 24 support, in particular when the Horizon System Helpdesk 25 became the Service Desk in 2005. Can we turn to 21 1 FUJ00080455. 2 There appears to be a problem with that. I'll 3 summarise the document. It was a report setting out the 4 requirements for the new Horizon Service Desk and, on 5 page 6 of the document at paragraph 1.10, we would have 6 seen that the change was introduced because the Horizon 7 System Helpdesk was not considered to be fully compliant 8 with the IT Infrastructure Library, or ITIL -- that's 9 IT Infrastructure Library, or ITIL. 10 ITIL provides a standard for IT service and asset 11 management and you will, in due course, wish to 12 investigate the red alert referred to, after what you 13 would have seen as the first set of bullet points, and 14 the external review of the Horizon System Helpdesk, 15 including how any shortcomings affected the advice and 16 assistance available to subpostmasters. 17 The service helpdesk was kept under review and 18 changes made to the service with the migration to 19 Horizon Online. That was described at FUJ00080457. You 20 will wish to investigate how the first line support 21 developed, and importantly, whether that affected the 22 availability or adequacy of the advice and assistance 23 received by subpostmasters. 24 You have already heard about the concerns raised 25 about the helpdesk during the rollout, as to its 22 1 capacity, and you have heard subpostmasters' evidence of 2 poor service provided by the helpdesk. These are issues 3 that you will wish to investigate carefully in due 4 course. In particular, you will wish to examine the 5 support available in respect of balancing and how to 6 deal with discrepancies. 7 At this stage, can I ask to be brought up 8 POL00029174. This is an audit dated 28 April 2000, you 9 can see that in the top right. It's authored by Jan 10 Holmes, you'll see that at the foot of the screen there. 11 Can we turn forwards, please, to page 5 of the document, 12 and look at paragraph 3.3.1 -- sorry, 3.1.1. Sorry, can 13 we go over the page, please? 14 Thank you, Ms Holmes describes, under the heading 15 "The Wednesday Peak": 16 "The fundamental problem facing the [helpdesk] is 17 the weekly 'spike' of work on Wednesdays associated with 18 Cash Accounts and Balancing. The fact that the work 19 load on this day is anomalous with the remainder of the 20 working week is providing a real challenge to OSD in 21 balancing the need to meet [service level agreements] 22 while operating within a sensible staffing model that 23 takes account of the total call pattern over a week. 24 OSD are looking at ways of alleviating the problem, 25 especially as the key [service level agreements] under 23 1 pressure are the prime targets of this weekly workload." 2 The audit went on to recommend that the NBSC -- 3 that's the Business Support Centre -- be positioned to 4 as a gatekeeper to the helpdesk in an aid to reduce call 5 volume and to implement interactive voice recognition. 6 It was noted that: 7 "It would not be practicable to resource the 8 [helpdesk] to meet the Wednesday spike since for the 9 remainder of the week it would be impossible to retain 10 the motivation and commitment of staff sitting." 11 We will investigate how these issues and 12 recommendations were monitored. 13 Before moving on, can I draw your attention to one 14 example of the "Wednesday Peak", as it's described, 15 which is in Colin Baker's letter to the national 16 executive council of the NFSP, that's NFSP00000020. So 17 a letter dated, I think, 4 May, actually, rather than 18 the 3rd, which I said. Mr Baker states that a balancing 19 problem had arisen because of an error made by 20 subpostmasters in completing stock reconciliation the 21 week before. Mr Baker states in the first paragraph 22 that this was a result of "poor advice": 23 "You may no doubt be aware that there were 24 significant difficulties with Horizon balancing at some 25 post offices yesterday. We are waiting for a definitive 24 1 answer from [Post Office Counters Limited] on the 2 problems encountered. However what we know so far is 3 that a problem arose last Thursday morning in the 4 uprating of stamps and, resulting from poor advice, some 5 subpostmasters did not correctly complete the upgrading 6 of stock reconciliation that day. That manifested when 7 they tried to balance yesterday." 8 The helpline devised a workaround but, as we would 9 read on in the letter, the backlog soon developed of 10 100 calls by 3.30 pm that day. Mr Baker goes on in his 11 letter to suggest that the helpdesk eventually advised 12 subpostmasters not to wait to balance. 13 You will wish to investigate how incidents like this 14 were handled by the support services generally. 15 That can come down, thank you. 16 You will hear evidence of a system known as 17 PowerHelp, with a capital P and capital H. This was the 18 system the helpdesk used to manage calls. It was 19 an important system because it was the main gateway into 20 the remainder of support services. The helpdesk was 21 tasked with assigning a priority to each call. 22 Please could I ask that POL00000912 is brought up 23 and can we turn to page 11 of this document, please. 24 This is part of the support services operations manual. 25 Can we zoom in on the table in the middle there, with 25 1 the "A", the "B" and the "C". Thank you. 2 The table here sets out a scale of the 3 prioritisation for calls. The words obviously speak for 4 themselves, but in summary, priority A was for issues 5 preventing the branch from processing business. 6 Priority B would involve a problem that restricted 7 business but did not cause it to cease altogether. 8 Priority C was for those cases where there was a problem 9 but one that did not affect the trade of the business. 10 Lastly, priority D was for internal problems not related 11 to a Post Office. 12 I pause here to note that how service tickets were 13 prioritised may be an issue that you will wish to 14 consider. Mr Justice Fraser's finding in the Horizon 15 Issues judgment at paragraph 493(1) that: 16 "Fujitsu routinely assigned non-critical Category C 17 to matters that were really very important in their own 18 right in any event, but of extreme importance to SPMs 19 whose branch accounts were being directly affected." 20 His Lordship noted that category A and B priorities 21 could attract contractual penalties for Fujitsu but he 22 made no findings on whether that affected the 23 prioritisation of calls. That's something you may wish 24 to consider in the course of the Inquiry. 25 As would be expected for first line support -- 26 1 I should say that document can come down. Thank you. 2 As would be expected for first line support, it was 3 intended that the helpdesk or service desk would be able 4 to rectify some issues raised by subpostmasters without 5 referring it up to the second line support. It's 6 obviously important for each level of support not to 7 refer up calls unnecessarily. To do so risks 8 overloading the higher levels of support, drowning out 9 the potentially more serious problems on which they 10 should be focused. 11 The helpdesk had access to a resource known as Known 12 Error Logs, also known as KELs. This was a searchable 13 database maintained on an intranet and I'm going to 14 shortly take you to an example of a KEL. It documented 15 previously identified issues in Horizon that contained 16 authorised workarounds or authorised further action 17 where available. This was supposed to provide 18 a resource to first line support to resolve calls 19 themselves. You will wish to consider how effectively 20 the first line support used the KELs database to resolve 21 subpostmasters' technical problems more quickly and 22 avoid overburdening upper lines of support. 23 Can I turn briefly to second line support, provided 24 by the System Management Centre, the SMC. It had at 25 least two core roles. The first was to act as 27 1 a traditional second line of support and try to 2 investigate problems that the first could not resolve. 3 This is described in POL00000912 at page 11 where we see 4 the responsibilities of the SMC. 5 Unsurprisingly, it was supposed to act on its own 6 where a service ticket identified a problem for which 7 there was an authorised workaround. The SMC had 8 an important role in respect of these problems that did 9 not involve a workaround. Again, unsurprisingly, it was 10 to pass over to the SSC any new problem that had not 11 been identified before. However, where the problem had 12 occurred before and had been raised with the SSC, the 13 SMC was only to link the new call to avoid the 14 duplication of work. 15 Again, these may seem trivial matters but you may 16 wish to investigate how the SMC acted as a filter for 17 the SSC. As I will set out shortly, the SSC was a vital 18 body of third line support designed to investigate 19 potential systems. 20 You will hear from Mr Cipione on how the failure to 21 filter calls properly affected the service the SSC was 22 able to provide. In particular, in paragraph 15.1.3 of 23 his report, Mr Cipione notes that: 24 "The fact that the SMC did not filter lower-level 25 issues meant that the SSC was burdened with performing 28 1 this triage. This extra work delayed the SSC from 2 addressing the true technical issues within the Horizon 3 system." 4 There are indications that the SMC made improvements 5 in filtering calls. The reference to that is page 10 of 6 POL00029245. That's an issue that you will wish to 7 investigate throughout the relevant period. 8 Can I draw your attention to a second role of the 9 SMC, and that was to monitor Horizon for events that 10 would indicate that a problem has arisen. Please can we 11 bring up POL00029425. 12 This a KEL -- you can see this three lines from the 13 top -- created by John Ballantyne -- you can see that 14 against the word "Raised" on the fourth line -- on 15 12 February 2010, again, "Raised: by John Ballantyne, 16 12/02/2010". It's in relation to receipts and payment 17 mismatches in Horizon Online. This is a standard form 18 print of a KEL, something that you're going to become 19 very familiar with over the next few months. 20 There is an alphanumeric reference at the top of the 21 page, in this case "ballantj1759" so it starts with 22 letters from the initial author's name followed by 23 numbers. 24 At the foot of the screen, under the heading 25 "Symptoms", the KEL states that a counter error event 29 1 has been generated and it gives an example. You will 2 see in this example that the figure after 3 "totalReceipts" does not match the figure for 4 "totalPayments". You can see three lots of text in 5 under "Symptoms": 6 "totalReceipts=250016.45, totalPayments=-200016.45." 7 So the figure after "totalReceipts" does not match 8 the figure for total payments. 9 If we scroll down the page, you will see under the 10 heading "Problem", the problem section of the KEL states 11 that this event was generated when there was a payments 12 and receipts mismatch on a counter balancing report. It 13 indicated that there was a software error or data 14 corruption. 15 The KEL goes on to note that the event had been 16 generated by a number of software faults previously. 17 For present purposes, the key point here is under the 18 "Solution". There is an instruction to the SMC, you can 19 see that under the first part of the heading "Solution": 20 "SMC/counter eventing team: raise a B priority call 21 and send to SSC if you see this event ..." 22 This demonstrates the role the SMC had in 23 identifying from the Horizon System when bugs, errors or 24 defects had manifested. This was an important role in 25 circumstances where subpostmasters were unable 30 1 themselves to interrogate the data upon which Horizon 2 operated to determine whether a discrepancy was a user 3 fault or a system fault. You will wish to consider how 4 effective the SMC was in carrying out this role. 5 That can be taken down. Thank you. 6 Can I turn to third line support briefly. The 7 System Support Centre, the SSC. Please could we look at 8 POL00000912. Thank you. 9 This is the "CS Support Services Operations Manual", 10 which describes the support services provided by, at 11 that time, Pathway Customer Services. Can we turn to 12 page 8, please, of the document. 13 The SSC is described at the top under paragraph 3 as 14 being: 15 "Responsible for all support activities, and, in 16 particular, it provides third line support for all 17 applications in the Pathway estate." 18 Then if we look at paragraph 4.1, in the second part 19 of 4.1, this document describes that: 20 "The aim of the SSC is to provide a support 21 capability to Pathway that resolves technical problems 22 in the minimum time and with the minimum amount of 23 disruption to the service. The SSC aims to provide 24 a centre of technical expertise for Customer Service, 25 providing technical advice, guidance, and expertise 31 1 relating to all parts of the Pathway [service]." 2 Then if we go forwards to page 9 of the document, 3 please. Amongst the list of responsibilities, if we 4 just highlight number 7, please. One of the 5 responsibilities of the SSC was to maintain the KEL 6 database. Accordingly, it was incumbent upon the SSC to 7 maintain KELs adequately to enable the first and second 8 line support to act as a filter. 9 It is clear that the SSC was at the heart of the 10 support services provided for Horizon. It's a highly 11 relevant body for several issues that you will be 12 required to investigate. In particular, it's central to 13 the investigation and rectification of bugs, errors and 14 defects in Horizon. Its work was, moreover, 15 foundational to the advice and assistance that 16 subpostmasters would receive. You will therefore wish 17 to consider the adequacy of the operation and the 18 services provided by this body with due care. 19 Can I turn to PinICLs and PEAKs, and investigating 20 bugs, errors and defects. 21 That document can come down, thank you. 22 You will hear about the systems that the SSC used to 23 manage service tickets. The first iteration of that 24 system was called PinICL, which I referred to yesterday 25 in relation to Phase 2. The second manifestation of the 32 1 system was called PEAK. The new PEAK system was 2 explained in a user guide on 8 October 2004 -- to which 3 you will be referred in due course, and which can be 4 found at FUJ00079926, as a system used to record 5 information of calls and other investigations into the 6 relevant problem. 7 I referred you to a PEAK earlier in respect of 8 training. The efficacy of the PinICL and PEAK system is 9 important for two reasons: firstly, it was the 10 centralised location for storing data relating to 11 a service ticket, whether a call or evidence of 12 an investigation. In that regard, the efficacy of the 13 system would affect the quality of service provided to 14 subpostmasters. Second, it was important for wider 15 system issues. It was important to avoid duplication of 16 PEAKs, duplicate PEAKs, or to identify linked problems 17 using the system. These are issues that you will 18 consider in due course. 19 An issue you will wish to investigate is how support 20 services like the SSC investigated problems with the 21 third-party software. You have heard that a fundamental 22 building block of Horizon, Riposte, was provided by 23 Escher. Can we look, please, to FUJ00083596 and can we 24 go to the second page, please, and look at the email in 25 the middle of the page. Thank you. 33 1 This is an email exchange of 17 April 2001 between 2 Gareth Jenkins and Brian Orzel. Mr Jenkins asked in the 3 first email on a way of listing "current Escher-Dev 4 PinICLs". We understand this to mean incidents that had 5 been raised that required third or fourth line support 6 from Escher in relation to Riposte. 7 Mr Jenkins wanted to go through those PinICLs to see 8 which may be affected by upcoming releases, and he says: 9 "My belief is that many of them can be 'lived with', 10 in which case they need to be downgraded to D (or at the 11 highest C)." 12 Then back to the first page of the document, please. 13 Mr Orzel responds with a list of the PinICLs, they're 14 set out in the bottom part of the email and over to the 15 next page, and states: 16 "As to the PinICLs themselves, I think that it makes 17 good sense to postpone them from last-minute fix 18 releases, but given the amount of money we pay for 19 support, when we have a full regression cycle like 20 (presumably) S10, I would want them ALL fixed, including 21 the D priorities. No exceptions. Chris has the final 22 say of course ..." 23 You will wish to investigate how potential bugs, 24 errors and defects in Riposte were investigated and 25 rectified. Mr Justice Fraser found that there were such 34 1 bugs that had the ability to affect balances. You will 2 hear evidence on a bug that became known as the 3 Callendar Square or Falkirk bug. This was an error in 4 the Riposte system. It occurred when a subpostmaster 5 tried to transfer from one stock unit to another. The 6 sending unit would successfully record that the transfer 7 had been sent but the receiving unit would not register 8 the receipt. 9 That document can come down now, thank you. 10 This could result in the subpostmaster repeating the 11 transfer, and whilst the transfer would appear to be 12 unsuccessful, the sending stock unit would be depleted. 13 This would, in turn, lead to a discrepancy. We can see 14 evidence of this in POL00028984, being an email from 15 Anne Chambers, that concerned the Callendar Square bug, 16 which is described as having "been around for a years 17 and affects a number of sites most weeks". 18 Mr Justice Fraser found that this bug started from 19 the year 2000 and you will, in due course, be referred 20 to PinICLs over number of years describing a problem 21 with a Riposte log. What you will wish to know is why 22 this problem was not addressed, and addressed earlier. 23 In summary, you will wish to investigate the role 24 that the SSC played in identifying bugs, errors and 25 defects, in advising subpostmasters on the same and then 35 1 in resolving them. You will hear from witnesses who 2 explain the general processes described, but you will 3 also wish to investigate actually how bugs, errors and 4 defects were, in fact, resolved. 5 Can I turn to remote access. 6 The SSC had a significant role in another area of 7 interest to the Inquiry, namely remote access. I will 8 return to remote access when, in a moment, I deal with 9 modifications. 10 I raise it now in respect of the SSC's use of these 11 privileges, remote access privileges. 12 We will see -- it needn't be turned up now -- from 13 POL00000912, that the SSC had access to the live system 14 which, according to that document, "can be used to 15 correct data on the system when it has been corrupted in 16 some way". 17 That document goes on to describe a designed process 18 for correcting, originating from an Operational 19 Correction Request or an OCR. 20 The use of the OCR system and how it was controlled 21 are both areas which you will wish to give careful 22 consideration to, and you will be referred to what's 23 called the Operational Change Process, known as OCP, as 24 described in documents such as POL00029282. 25 The possibility of remote access was not limited to 36 1 OCRs and OCPs, you will hear evidence of various ways 2 that teams at Fujitsu could access and could edit live 3 data and you will be referred to documented concerns 4 about the use of remote access. 5 Now, I'm going to give two examples. Firstly, can 6 we bring up FUJ00088036 and can we turn to the 7 introduction of this document, which I think is at 8 page 9 and enlarge that. Great, thank you. 9 This introduction explains the background to the 10 document and its purpose, and it was made, the document, 11 against a background of lack of audit and control 12 mechanisms on the administration of the live Horizon 13 estate. This is a document that you're going to wish to 14 consider as a whole carefully during the Inquiry. But 15 can I just highlight at the moment, please, 16 paragraph 4.3.2 of the document which is on page 15. 17 Under "Third line and operational support", it says: 18 "All support access to the Horizon System is from 19 physically secure areas. Individuals involved in the 20 support process undergo more frequent security vetting 21 checks. Other than the above controls are vested in 22 manual procedures, requiring managerial sign-off 23 controlling access to post office counters where update 24 of data is required. Otherwise third line support has: 25 "Unrestricted and unaudited privileged access 37 1 (system admin) to all systems including post office 2 counters PCs ..." 3 Secondly: 4 "The ability to distribute diagnostic information 5 outside of the secure environment; this information can 6 include personal data (as defined by the Data Protection 7 Act), business sensitive data and cryptographic key 8 information. 9 "The current support practices were developed on 10 a needs must basis; third line support diagnosticians 11 had no alternative other than to adopt the approach 12 taken given the need to support the deployed Horizon 13 solution. 14 "There are however no automatic controls in place to 15 audit and restrict user access. This exposes Fujitsu 16 Services Pathway to the following potential risks: 17 "Opportunity for financial fraud; 18 "Operational risk -- errors as a result of manual 19 actions causing loss of service to outlets; 20 "Infringements of the Data Protection Act." 21 You will also wish to note in this document on 22 page 16, please, just over the page, under the first 23 bullet point in paragraph 4.7, which is at the bottom: 24 "The following security requirements are specified 25 for support of Pathway systems: 38 1 "The design must define how the current method used 2 by SSC to access counters is prohibited. The BI2 3 release included a Microsoft supplied security hot fix 4 that closed off the security loophole being exploited by 5 the SSC. A new route has been supplied ..." 6 We needn't read on. 7 You will wish to investigate how the SSC and other 8 teams at Fujitsu had used remote access before this 9 report and as referred to in this report as the security 10 loophole being exploited by the SSC. 11 You will be interested to hear evidence on how such 12 remote access was managed following this design and 13 whether this document and the design that it introduced, 14 addressed the concerns identified in it. 15 Following on from that, the second document 16 involving remote access, to which I should draw your 17 attention, is FUJ00089756, this is a PEAK. It's PEAK 18 PC0208119. This was referred to Mr Justice Fraser in 19 the Horizon Issues judgment and, at the foot of the 20 screen that's now displayed, under "Impact Statement", 21 you will see that it says: 22 "1. SSC users affected have more access than is 23 required to database resources. This is contrary to 24 security policy." 25 Then 3: 39 1 "Perceived Impact: The customer is not aware of this 2 problem or change." 3 This PEAK goes on to state that SSC users had access 4 to a role called APPSUP with extremely powerful 5 privileges and, indeed, we'll find an email from Anne 6 Chambers that's been copied into the PEAK, stating "When 7 we go off piste we use appsup". The Inquiry has sent 8 Rule 9 requests concerning how remote access was used, 9 and we intend to call witnesses to speak to these 10 issues. Sir, you will wish to consider the extent of 11 the remote access privileges available to Fujitsu who 12 had access to them, and the adequacy of the audit and 13 security measures in place. 14 Can I turn to another third layer of third line 15 support -- that document can come down now -- the 16 Management Support Unit, MSU, which was tasked with the 17 identification and resolution of reconciliation 18 incidents. It was moreover responsible for identifying 19 and raising problem incidents where it detected a series 20 of similar reconciliation incidents. 21 Please could we turn to the "TPS Reconciliation and 22 Incident Management Procedure" at FUJ00001627. This 23 sets out the procedures for managing identified errors 24 in data or reconciliation. 25 The MSU was responsible for monitoring a series of 40 1 reports known as Transaction Processing Service 2 Reconciliation Reports. We can see that at page 8 of 3 the document -- maybe I mean page 9. Over the page, 4 please, under "Introduction". 5 In summary, it consists of seven reports produced 6 daily that would show reconciliation errors, such as 7 receipts and payment mismatches. An error would, having 8 been identified, lead to the MSU raising a business 9 incident, which would be logged by the helpdesk. And 10 you will hear in evidence reference to BIMS reports, 11 which are Business Incident System Management reports, 12 and also hear reference to the Manual Error Reports. 13 These reports only concerned the symptoms of a problem, 14 such as the fact of a discrepancy, rather than the 15 causes. 16 The causes of the error were handled by different 17 processes, of which you will hear, such as system 18 incident logs, problem management, incident or defect 19 management, and will be referred in evidence on how 20 business incidents were handled. In particular, you 21 will wish to examine the Business Incident Management 22 System operated by Fujitsu and you will wish to 23 investigate how such business incidents were managed 24 individually and collectively. 25 Fujitsu's fourth line of support -- that document 41 1 can come down now, thank you -- was engaged where the 2 third line had found evidence that may indicate a fault 3 in the Horizon software itself or it could not otherwise 4 establish why an incident occurred. That is described 5 in FUJ00079425. You will wish to investigate how fourth 6 line support operated to address identified systems in 7 Horizon. A further issue to investigate is how fixes to 8 Horizon were pushed out. 9 A meeting existed called the weekly Release 10 Management Forum or RMF. The RMF is described as being 11 responsible for determining what fixes to develop, and 12 their associated risks, and whether to roll out a fix 13 before a planned major software release. There is no 14 need to turn it up but we can see that description at 15 POL00000912, page 25. 16 Whilst this forum appears to have been designed to 17 plan when fixes were made, the procedure goes on to 18 provide for the options of emergency fixes being rolled 19 out more quickly and we will, in due course, examine how 20 these procedures were used in the rectification of bugs, 21 errors and defects. 22 Before the break, can I turn to modifications. You 23 will hear evidence on the modifications made to Horizon 24 over the course of its lifetime, both as Legacy Horizon, 25 as I've described it, and Horizon Online, which I will 42 1 come to in a moment. 2 The issues for you to consider are set out in issues 3 18 to 28 of our list of issues. Some of the 4 modifications you will hear about were designed to 5 resolve known errors and issues with Horizon. Others 6 enforced policy decisions informed by the approach that 7 the Post Office wished to take, as regards the disputes 8 procedure between it and its subpostmasters. You will 9 wish to consider in both types of cases the specific 10 factors that led to those changes taking place and 11 whether adequate steps were taken to review the effect 12 of those changes. 13 As part of that analysis, you will wish to consider 14 how subpostmasters' feedback was accumulated and 15 reviewed if at all, and if that was sufficient. 16 The most noteworthy modification provided by policy 17 was the decision to remove the suspense account for 18 disputed sums when subpostmasters rolled over from one 19 trading period to the next. This was referred to as the 20 IMPACT programme. Prior to 2006, when the programme was 21 rolled out, subpostmasters were able to post cash 22 discrepancies in a suspense account where discrepancies 23 were found and to roll them over into a new trading 24 period. 25 After conducting a feasibility study in the early 43 1 2000s, it was decided to remove this facility so that 2 subpostmasters were required either to make shortfalls 3 good with cash on the spot or to undertake to settle 4 centrally in order to roll over. Subpostmasters were 5 unable to continue trading unless they did those things. 6 As such, as the result of the IMPACT programme, their 7 choices, when faced with a discrepancy at the end of 8 a trading period, were to make good the difference, 9 settle the difference centrally or to cease to trade. 10 I will come on to address the limited mechanisms by 11 which subpostmasters were subsequently able to dispute 12 sums. 13 The IMPACT programme was authorised and supported by 14 the incumbent Post Office finance director, Peter 15 Corbett, and the business process architect was David 16 Parnell. It had a very high approval within the Post 17 Office itself. It was developed, as with other 18 modifications made to Horizon with Fujitsu. The shape 19 of the IMPACT programme was set out in a number of 20 reports, including one entitled "Accounting & Cash 21 Management Programme: Conceptual Design", at 22 POL00038870. 23 In this document, under a section entitled 24 "Accounting, Reconciliation and Settlement, including 25 Debt Recovery and Branch Control", the key priorities 44 1 described included: 2 "[i] Refocus on Debt Recovery (financial recovery of 3 money), target 95% 4 "[ii] Only 10% of discrepancies are actually debt 5 "[iii] Establish a central debt monitoring 6 environment to enable the identification of debt with 7 a high degree of accuracy ... 8 "[iv] To increase accounting control in branches." 9 As if the objectives were not clear enough, it was 10 further elaborated in a subsequent document called 11 "Branch Trading Reporting, Management and Control and 12 Transaction Management Conceptual Design", POL00038878, 13 that: 14 "By the end of a monthly trading period, branches 15 should be required to make good discrepancies between 16 Horizon generated cash and stock positions and the 17 actual physical position determined by branch office 18 staff. To help facilitate this, existing Horizon 19 facilities that permit branch staff to post cash 20 discrepancies to a cash suspense account will be 21 removed." 22 You will hear evidence to the effect that the reason 23 why this change was made was because of a sense that the 24 suspense account was being used to hide disparities. It 25 is obvious that, as a result of this modification, 45 1 subpostmasters were put in a position where it was more 2 difficult to dispute shortfalls or discrepancies. 3 Indeed, that was the very point of the change being 4 made: to enable the Post Office itself to have greater 5 control over the accounting done within the branch. It 6 pushed subpostmasters into accepting by default the 7 discrepancies that appeared on Horizon. 8 I wish also to highlight the involvement of Gareth 9 Jenkins of Fujitsu in the IMPACT programme. He was 10 heavily involved in the development of the software 11 releases involved in the IMPACT programme. We can see 12 that at FUJ00085125. As you will see and hear later, he 13 was heavily involved in many of the issues to which this 14 Inquiry relates. 15 You will wish to consider the effect that this 16 change had on the ability of subpostmasters to dispute 17 any alleged shortfalls and to consider how appropriate 18 the change was in circumstances where there were 19 a number of errors, bugs and defects present. You will 20 want to investigate whether there were less draconian 21 options available to the Post Office to meet its 22 identified business needs, whilst allowing room for 23 challenging discrepancies at the end of a trading 24 period. 25 Sir, that's an appropriate moment, if it is suitable 46 1 for you to give the shorthand writer a break and break 2 for ten minutes or so. 3 SIR WYN WILLIAMS: That's fine, Mr Beer. When you say 4 ten minutes or so, shall we realistically say 11.35, 5 15 minutes, for everybody to have a rest? 6 MR BEER: You're very generous, sir. Thank you. 7 SIR WYN WILLIAMS: Okay, fine. See you in 15 minutes. 8 (11.20 am) 9 (A short break) 10 (11.35 am) 11 MR BEER: Can you see and hear me? 12 SIR WYN WILLIAMS: All set. 13 MR BEER: Very good. 14 Can I turn to another type of modification, where 15 modifications were required because of issues or errors 16 in Horizon. You will hear about the so-called Ping Fix 17 and the Ping Fix project. These was considered by 18 Mr Justice Fraser. It was introduced in 2012 because of 19 the issues caused by the fact that the National Lottery 20 terminals were on one computer system operated by 21 Camelot but Horizon was the system being operated by 22 branches to sell Camelot products. 23 The Post Office had to issue a high volume of 24 transaction corrections to ensure consistency. In the 25 words of Mr Justice Fraser, the Ping Fix was about 47 1 "remedying a deficiency in the functionality of 2 Horizon". 3 A feasibility study carried out in contemplation of 4 what eventually became the Ping Fix was firmly in 5 development by March 2009. We can see that from 6 FUJ00091215. At that time, the process for identifying 7 any errors was that the Post Office Products and Branch 8 Accounting would "compare the data coming from Horizon 9 with the direct feed they have from Camelot. Where they 10 differ, then the transaction corrections are issued to 11 the Branch to rectify the situation, since it is 12 expected that the Camelot feed is more reliable than the 13 data received from the Branch". 14 This was carried out manually with individuals 15 reviewing the transactions. The exercise resulted in 16 an extremely high volume of transaction corrections 17 being issued to correct the position. 18 This is just one example but you will wish to 19 consider whether this need to check manually all 20 transactions against Camelot for accuracy should have 21 alerted the Product and Branch Accounting Team and the 22 Post Office to the fact that Horizon data was not 23 infallible and, if these issues were chalked up to being 24 a matter of user error, whether this should have 25 resulted in a particular training programme being 48 1 carried out, rather than an extremely high volume of 2 transaction corrections. 3 Can I turn to Horizon Online. The biggest 4 modification or change over the course of the lifetime 5 of the system was the migration from Legacy Horizon to 6 Horizon Online, in 2010. As you will recall, the 7 structure of the legacy system meant that data had to be 8 held at the branch itself, pending a connection to the 9 Horizon databases. This was done with software known as 10 Riposte. From 2006, the Post Office and Fujitsu were 11 already in discussions to develop what was described as 12 an HNG-X migration strategy and were negotiating the 13 basis on which to proceed. 14 We can see that at FUJ00002012. Over the subsequent 15 years, the two parties worked together to develop what 16 would become Horizon Online's first iteration, HNG-X. 17 You will hear evidence as to what the Post Office's 18 requirements for acceptance amounted to -- that's at 19 POL00032999 -- and consider whether these ensured 20 Horizon Online functioned adequately. As I will come on 21 to address in a moment, you will also wish to consider 22 whether the Post Office had the relevant information to 23 make a decision as to whether to accept Horizon Online. 24 Things did not start well for Horizon Online. The 25 high volume rollout had to be suspended because of the 49 1 failures to migrate, and you will hear evidence as to 2 whether this could have been avoided and the reasons why 3 it happened. 4 On 19 February 2010, Alan D'Alvarez, who you will be 5 hearing from in the Phase 2 hearings, sent an email to 6 other Fujitsu employees informing them that there had 7 been a failure to migrate all 19 of the post offices 8 that were supposed to migrated that day. That's 9 FUJ00098168. This was described as being a "Major 10 Incident". In a follow-up email, Mr D'Alvarez informed 11 his colleagues that a senior member of the Post Office 12 team, Mike Young, was "extremely angry and running 13 around looking for someone to shoot". 14 A few days later, on 24 February 2010, Mark Burley, 15 the HNG-X programme manager at the Post Office, wrote to 16 Marilyn Stoddart of the NFSP to inform her that 144 post 17 offices had migrated to the new system, but the 18 migration of the next 100 had to be paused. That's 19 NFSP00000061. 20 He explained that some of the branches that had 21 migrated had had problems, including being unable to use 22 the system at all for some of the day. 23 There were further issues identified by Fujitsu 24 after Horizon Online went live. One of those, as 25 summarised in a note produced by Fujitsu employee 50 1 Penelope Thomas, dated 22 June 2010, was that the 2 Horizon Online application was duplicating transaction 3 records. In FUJ00097058 she wrote: 4 "The HNG-X application does not identify or 5 'discard' duplicated records and thus duplicated 6 transactions are appearing in the ARQ returns." 7 She went on to say that: 8 "Further analysis identified on 22 June that 9 approximately one-third of all ARQ returns generated 10 under the HNG-X application have duplicated transactions 11 included." 12 At the time that her report was written, the 13 presence of this issue had not been communicated to the 14 Post Office and she highlighted that there was a need to 15 identify cases that have progressed to prosecution and 16 to identify whether duplicate records were included. 17 When Ms Thomas sent this report to Fujitsu 18 colleagues, Gareth Jenkins commented: 19 "In summary, any detailed analysis of the finances 20 of a Branch which is done with duplicate transactions 21 without realising that there are duplicates (and so 22 removing them) will give incorrect results." 23 FUJ00097046. 24 When Ms Thomas asked whether she should inform her 25 counterpart at the Post Office of this issue, she was 51 1 told: 2 "Please do not make any communication on this issue 3 with [Post Office] for the moment. We've been looking 4 at this today and are waiting to determine if a proposed 5 work around is adequate." 6 FUJ00097046. 7 The reason given for holding off was given by Guy 8 Wilkerson, who stated: 9 "I'd hate to have the Post Office raise this as 10 an issue with HNG-X Acceptance Board on Tuesday." 11 We're sending Rule 9 requests to those responsible 12 for taking these decisions on behalf of Fujitsu. They 13 will speak to the critical issue of what was 14 communicated to the Post Office and when. You will need 15 to consider whether, where Fujitsu knew that there was 16 an issue, adequate steps were being taken to bring this 17 to the Post Office's attention or, alternatively, 18 whether Fujitsu acted to protect its own reputation and 19 its own commercial interests. 20 Later in 2010, the Post Office carried out its own 21 review of Horizon and that's both Legacy Horizon and 22 Horizon Online. Rod Ismay, the head of Product and 23 Branch Accounting, was asked to carry out a review of 24 the data integrity of Horizon and Horizon Online by Dave 25 Smith, the managing director at that time. 52 1 On 2 August 2010, Mr Ismay produced a document 2 entitled "Horizon -- Response to Challenges Regarding 3 Systems Integrity". We can see that POL00026572. 4 Mr Ismay described the paper as being "compiled as 5 an objective, internal review of POL's processes and 6 controls around branch accounting". It's unclear on 7 what basis it was asserted to be objective. In its 8 introduction, it was acknowledged that there had been 9 coverage in the national media that Members of 10 Parliament had shown an interest in certain cases and, 11 in the executive summary, Mr Ismay stated: 12 "The allegations to which we are responding follow 13 on from cases where thousands of pounds were missing at 14 audit. We remain satisfied that this money was missing 15 due to theft in the branch -- we do not believe the 16 account balances against which the audits were conducted 17 were corrupt." 18 He relied on "the extensive controls" that Post 19 Office had in place in support of that assertion, along 20 with the training and the support that was in place. 21 Critically, he stated: 22 "The integrity of Horizon is founded on its tamper 23 proof logs, its realtime backups, and the absence of 24 'back doors' so that all data entry or acceptance is at 25 branch level and is tagged against the login ID of the 53 1 user. This means that ownership of the accounting is 2 truly at branch level." 3 Of course, as you know from the common issues 4 judgment of Mr Justice Fraser, in fact Fujitsu had 5 direct access to the branch databases. This was 6 something that Lynne Hobbs, another Post Office 7 employee, highlighted in 2010 in response to the report 8 being circulated. 9 Can we look, please, at POL00088956. Can we look at 10 the second page of that document, please, and the email 11 underneath "My reply to Mike and Rod", thank you. She 12 says: 13 "I'm happy with the report and just have one 14 observation. 15 "I found out this week that Fujitsu can actually put 16 an entry into a branch account remotely. It came up 17 when we were exploring solutions around a problem 18 generated by the system following migration to HNG-X." 19 She described how this was resolved for Fujitsu to 20 remotely enter a value into a branch account to 21 reintroduce the missing loss or gain: 22 "One solution [this is the last part of that email], 23 quickly discounted because of the implications around 24 integrity, was for Fujitsu to remotely enter a value 25 into a branch account to reintroduce the missing 54 1 loss/gain. So POL can't do this but Fujitsu can." 2 You will hear evidence from individuals who were 3 there at the time about what was known within the Post 4 Office about the ability of Fujitsu to enter such values 5 remotely and we'll hear evidence from individuals with 6 experience of working at Fujitsu. You will wish to 7 consider how this fact impacted on the Post Office's 8 confidence in its data integrity. 9 That can come down now, thank you. 10 Turning back to Mr Ismay's 2010 paper, as I've 11 already said, he relied on number of factors in support 12 of his assertion that Horizon's data integrity was no 13 cause for concern. 14 One factor he relied upon was the "Court Decisions" 15 as he called them, that had found in the Post Office's 16 favour. He highlighted three, as he called them, 17 "landmark" cases. The first of these was the Clevelleys 18 case in 2001. In that case, the subpostmistress was 19 dismissed in 2001 soon after Horizon was introduced. 20 Her lawyers produced a report showing how Horizon could 21 have caused an error. The Post Office settled this case 22 for £187,000 because it did not have the transaction 23 logs to "refute" the claim. 24 The learning point from this case, as it was 25 summarised, was to ensure that the Post Office had 55 1 transaction logs to back up its own allegations. 2 The second case referred to was the Castleton case 3 in 2004, named after the subpostmaster involved, Lee 4 Castleton, and you will recall that you've already had 5 read evidence from Mr Castleton and his daughter, Millie 6 Castleton, which was summarised to you during the human 7 impact hearings. 8 Mr Castleton was made bankrupt as a result of the 9 proceedings taken against him. Mr Ismay commented that 10 that case "appeared to have put a stop to allegations". 11 The third case referred to by Mr Ismay was Alderley 12 Edge in 2010. In that case, the subpostmaster pleaded 13 guilty to false accounting, having been initially 14 charged with theft. The judge in the case was noted as 15 stating that he "had issues with the proof of size of 16 the loss", and went on to state "there are issues 17 relating to the Post Office computer system which I do 18 not feel able to judge". 19 Mr Ismay said that critics had "focused on these 20 comments rather than the fact that Mr Darlington had 21 pleaded guilty". 22 Overall, he summarised that "the record of 23 prosecutions does [not] support the assertion that 24 subpostmasters have been guilty rather than Horizon is 25 faulty". 56 1 Sorry, I'll read that again: 2 "The record of prosecutions does support the 3 assertion that the subpostmasters have been guilty 4 rather than Horizon is faulty." 5 You may wish to consider whether the success of 6 prosecutions mounted on the basis of Horizon was 7 something that was capable of pointing towards the 8 successful functioning of the computer system or, on the 9 other hand, whether it contributed to the institutional 10 belief of the Post Office that Horizon was invaluable. 11 Mr Ismay's report contained an appendix with input 12 from Fujitsu. The author of that appendix was Gareth 13 Jenkins. You will wish to consider whether individuals 14 like Mr Ismay, who were charged with the task of 15 examining the integrity of Horizon on the Post Office's 16 behalf, had themselves sufficient technical expertise. 17 As to the input sought from the subpostmasters 18 themselves about Horizon Online, you will hear evidence 19 on how issues were raised with the NFSP which were then 20 relayed to the Post Office and you will wish to consider 21 whether this and any other input sought, was sufficient 22 in the circumstances. 23 Can I turn to knowledge of bugs and errors. 24 It is settled that there were bugs, errors and 25 defects in the Horizon IT System that had the potential 57 1 to cause and did cause discrepancies or shortfalls in 2 subpostmasters' branch accounts or transactions or 3 otherwise undermine the reliability of Horizon 4 accurately to process and to record transactions. 5 Mr Justice Fraser found at least 12 such bugs, errors 6 and defects in Legacy Horizon and 13 in Horizon Online. 7 The fact that an IT system would have bugs, errors 8 and defects is not surprising. Indeed, it is likely 9 that Horizon would not have been a headline grabbing 10 project if the Post Office had not used data produced by 11 it to pursue prosecutions and civil claims. However, 12 you will, of course, still wish to examine the issue of 13 the nature of the bugs, errors and defects within the 14 Horizon System. In particular, you will wish to address 15 the core questions of who knew what and when. 16 The answer to these questions are of fundamental 17 importance to the Inquiry and will guide your views on 18 culpability for the decisions to pursue subpostmasters 19 in civil and criminal courts. You will, of course, wish 20 to bear in mind what the relevant people or bodies knew 21 about specific bugs at various points. But you will 22 also wish to consider what was known about the overall 23 totality of bugs, errors and defects because, speaking 24 hypothetically, a single bug that caused minor 25 discrepancies may not call into question the integrity 58 1 of the entire system. 2 You may consider that a series of bugs may do so, 3 particularly if they have been present for a long period 4 of time and especially if they had laid undiscovered for 5 substantial periods of time. 6 Bugs, errors and defects feature throughout the list 7 of issues and will be central to all of the phases. If 8 I can refer briefly to the list of issues to delineate 9 the particular questions you're asked to consider, and 10 on which to make findings. We do not wish to suggest 11 that these issues can be confined to one phase. It's 12 likely that you well hear evidence on these matters 13 throughout the hearings. 14 The first group concerns bugs, errors and defects, 15 and relates to knowledge. This is at paragraphs 49(A), 16 (B) and (E) of your list of issues, and paragraph 49 17 invites you to make findings on the state of knowledge 18 or various people and bodies. You will also wish to 19 consider the mechanisms that were in place to monitor 20 Horizon to find and rectify such bugs, errors and 21 defects. Those issues are captured in paragraphs 184 to 22 201 of the list of issues and will be dealt with in both 23 Phases 3 and 6. You will also hear evidence relevant to 24 various parties' knowledge of bugs, errors and defects 25 when you consider the pursuit of civil and criminal 59 1 proceedings based on the data produced by Horizon. 2 Therefore, we do not intend to deal with knowledge 3 of bugs and errors in full during the Phase 3 hearings; 4 it is a theme that will run throughout the Inquiry. 5 However, you, will hear a significant amount of evidence 6 on the nature and extent of various bugs during Phase 3. 7 We are also investigating, by way of Rule 9 8 requests, what knowledge various teams within Post 9 Office and Fujitsu had on bugs throughout the levels of 10 management providing training, giving support, or 11 resolving disputes. We will consider how that 12 information filtered through to other parts of the 13 organisations and beyond, in later phases, principally 14 Phase 6. 15 Your Inquiry is investigating all of the bugs that 16 were found by Mr Justice Fraser to have the potential to 17 cause discrepancies in branches or affect the integrity 18 of data within Horizon. Moreover, your Inquiry will 19 investigate other potential bugs, errors and defects in 20 Horizon that were not dealt with in the Horizon Issues 21 judgment. You will wish to consider who knew what and 22 when about all of those bugs, errors and defects, both 23 individually and collectively. 24 It would be neither helpful nor proportionate for me 25 to describe each of these bugs. I have already 60 1 discussed one of them, the Callendar Square bug, but 2 I introduce four other bugs that you will hear evidence 3 on in due course, namely the data tree failure 4 discrepancies, phantom transactions, receipts and 5 payments mismatch bug and the suspense account bug. 6 So, firstly, the data tree failure discrepancies 7 bug. 8 This was bug Number 10 in Mr Justice Fraser's 9 technical appendix. A data tree is a hierarchical 10 structure of data comprised of units called nodes, which 11 contain data. There is a single root node, which is 12 linked to other nodes, referred to as its children. 13 Each child node may have further children connected to 14 it. This creates a tree structure. 15 Legacy Horizon would use a data tree when using 16 an office snapshot as part of the balancing processes. 17 From the rollout of Legacy Horizon until at least the 18 IMPACT programme, the system would prepare the snapshot 19 by scanning the Riposte message store for relevant data, 20 such as stock levels. 21 The design was that it would build the data tree by 22 returning data from the various nodes in its structure. 23 The defect we are concerned with here refers to 24 a failure in Legacy Horizon to build the data tree 25 properly. The failure to build the data tree was not 61 1 identified by Legacy Horizon itself, so the snapshot was 2 completed with missing data. 3 Can we bring up, please, FUJ00086553. This is PEAK 4 PC033128 and it concerns a discrepancy that had been 5 identified at the Dungannon branch and was linked to 6 discrepancies at two other branches. Can we turn to 7 page 3 and, at the foot of the page, please -- yes, 8 under the entry 4 July 2000 at 10.40, "Root cause of 9 stock unit integration problem": 10 "Data trees have been failing to build fully, and 11 the system has not been detecting this. Consequently, 12 discrepancies in the balancing have been occurring. In 13 the case of Dungannon a whole Payments node was missing. 14 There have been a number of calls relating to this kind 15 of issue." 16 Therefore, in this case, Horizon had failed to 17 return data from a payment node when carrying out 18 a snapshot for the Dungannon branch. It had a dramatic 19 effect in that it failed to collect payments amounting 20 to £43,000. Mr Justice Fraser found that this had the 21 potential to affect branches if the subpostmaster chose 22 to roll over from the snapshot and make good the 23 discrepancy. You will wish to consider whether 24 subpostmasters would have identified bugs like this 25 where the discrepancies were not so stark, in terms of 62 1 the amount of money involved. 2 The documentation states that this particular data 3 tree failure was resolved by a software release. 4 However, Legacy Horizon continued to use data trees for 5 snapshots and balancing. Mr Justice Fraser found 6 evidence of similar reported issues in 2007, which your 7 Inquiry will consider. You will wish to investigate who 8 knew what and when about the potential for data tree 9 build discrepancies. 10 Can I turn to the second issue, the second bug, 11 phantom transactions. 12 The issue of phantom transactions was labelled as 13 bug 15 by Mr Justice Fraser, who made findings in 14 respect of a series of incidents around 2001. The name 15 of the bug, in fact, neatly describes the problem. 16 Subpostmasters complained that Horizon was logging 17 transactions by itself and without any input from 18 a user. This led to a number of investigations by the 19 SSC into several branches. 20 Can we please bring up FUJ00086682. This is PEAK 21 PC0066391, and can we look at the entry at the foot of 22 the page, at 13.09. That's it, thank you. 23 This summarises some of the investigations made by 24 the SSC and you'll see from that that the conclusion is 25 that there were four suspected potential causes of 63 1 phantom transactions. That's in the last three lines on 2 this page, and over on to the next page. It reads: 3 "There are four suspected potential causes of 4 phantom transactions, namely: 5 "Faulty screen or keyboard: resolution is to swap 6 them out. 7 "Faulty screen power supply: resolution is to swap 8 it out. 9 "User error: resolution is for users to follow 10 correct procedures. 11 "External environmental influence: trying to detect 12 and identify using ComTEst and system performance 13 monitoring." 14 Could I just turn back to "User error". You might 15 consider that user error cannot be a cause of a truly 16 phantom transaction. Rather, user error is an answer or 17 an explanation that points back to the user suggesting 18 that they have entered the transaction, perhaps 19 unintentionally. It's not really described properly as 20 a phantom transaction. One can see how it would be very 21 difficult for a subpostmaster to show that a recorded 22 transaction was a phantom transaction, rather than 23 a mere erroneous miskey by them. 24 However, in some cases, it seems that ICL Pathway 25 support services would make it impossible for some 64 1 subpostmasters. I will refer you, without asking for it 2 to be brought up, by way of example, FUJ00082401, which 3 is another PEAK, PC0065021. This was referred to in the 4 Horizon trial. A subpostmaster called the helpdesk to 5 complain about phantom transactions. He had raised this 6 complaint before but his service ticket had been closed, 7 unjustifiably in his view. 8 But a new set of investigations started and, as part 9 of those investigations, a Royal Mail engineer attended 10 his branch on 1 May 2001. The PEAK records that Romec, 11 that's the engineers, "have been to site today and have 12 fitted shielding cabling and suppressors". That was to 13 address the concern of a potential environmental cause. 14 Some branches had protective equipment installed to 15 block interference that could be caused by other 16 electronics. 17 The note goes on to say: 18 "Romec engineer advises that he has witnessed 19 further phantom transactions whilst on site." 20 That, of course, provided important corroboration to 21 the subpostmaster's account, ie that whilst the engineer 22 was on site he witnessed phantom transactions occurring 23 before his eyes. 24 Further investigations ensued, but the master call 25 ended by stating: 65 1 "Phantom transactions have not been proven in 2 circumstances which preclude user error. In all cases 3 where they have occurred, a user error relate cause can 4 be attributed to the phenomenon." 5 Decoding the language slightly, that must be 6 erroneous. In particular, other service tickets refer 7 to the hardware as being able to cause phantom 8 transactions and, of course, in this case, a Royal Mail 9 engineer saw the phantom transaction evolve in front of 10 their eyes. 11 You will wish to consider the extent to which 12 phantom transactions were properly and independently 13 investigated and, again, consider who knew what and when 14 about these nebulous potential defects. 15 Can I turn thirdly to the receipts and payments 16 mismatch bug. This was a bug in Horizon Online and was 17 the first numbered in the Horizon Issues judgment. It 18 arose in certain circumstances where a subpostmaster 19 tried to deliver a discrepancy into the local suspense 20 account. I will briefly cover the local suspense 21 account again. In summary, one could post losses or 22 gains in a stock unit, into the local suspense account, 23 prior to rolling over into a new trading period. This 24 was helpful to branches with more than one stock unit. 25 This is because an individual stock unit may have a loss 66 1 that was balanced by gains in other stock units. 2 It can be illustrated by way of example, in this 3 case, a subpostmaster who operated two stock units for 4 two counters. They transferred £1,000 of physical cash 5 from one counter to the other but forgot to record this 6 on Horizon. In this case there would be a £1,000 7 discrepancy between Horizon figures and the actual cash 8 for both stock units, one a loss and one a gain. 9 However, the overall branch would be in balance because 10 the loss and the gain cancelled each other out in the 11 local suspense account. 12 The receipts and payments mismatch bug arose in that 13 context. Where a subpostmaster tried to roll over a new 14 stock unit into a new trading period and Horizon Online 15 detected a discrepancy, the system would ask if it 16 wanted to post the discrepancy to the local suspense 17 account. The subpostmaster could post the discrepancy 18 at that point or could press "Cancel". 19 If they pressed "Cancel" at this point, two things 20 happened. Firstly, the discrepancy on the branch's PC 21 would be set to zero and would, in effect, be lost. 22 This would only affect the local PC and would not affect 23 the back-end accounting system. Secondly, the 24 subpostmaster would be taken back to a prior screen 25 where they could do one of three things: print or review 67 1 the trial balance of the stock unit again; reattempt to 2 roll over the stock unit; or cancel the attempt to roll 3 over the stock unit. 4 If the subpostmaster attempted the trial balance 5 again, it would not show the discrepancy. This is 6 because the local data with the discrepancy was set to 7 zero. If the subpostmaster attempted to roll over again 8 without cancelling, the stock unit would roll over with 9 the corrupted local file showing a zero discrepancy. 10 This created a receipts and payments mismatch. There 11 was no explicit warning to a subpostmaster that this had 12 occurred. 13 You will, in due course, hear evidence on how 14 Fujitsu sought to identify when these issues had arisen 15 by monitoring Windows Events, and you will wish to 16 consider how effective the exercise was and what was 17 communicated to subpostmasters regarding these issues. 18 Can I turn, lastly, to the suspense account bug. 19 This was number 3 in the Horizon Issues judgment. 20 It was again concerned with the local suspense account 21 and existed from 2011, being identified in 2013. In 22 essence, the bug cause subpostmasters to see losses or 23 gains in the local suspense account that simply had not 24 arisen -- did not arise -- in the current trading 25 period. 68 1 Fujitsu's support services concluded that this was 2 caused by a change to an archiving strategy in 2011, 3 which had itself been implemented to address another 4 problem. Fujitsu found that the change affected some 5 branches that deleted stock units, which had unresolved 6 discrepancies posted to the local suspense account. 7 Those losses and gains to the local suspense account 8 were not deleted. Therefore, when the same trading 9 period arose in the following year, the loss or gain 10 posted in the local suspense account the year before 11 would be put into the current day. 12 By way of illustration, a hypothetical branch posted 13 a loss of £1,000 into a local suspense account from 14 stock unit AA, as I'll call it, in trading period 9 in 15 2011. It then deleted stock unit AA. When it came to 16 balance the trading period 9 in 2012, Horizon Online 17 would erroneously enter the £1,000 into the local 18 suspense account for 2012. 19 This problem was not identified by Fujitsu in the 20 first year, 2012. It became aware of the issue in 2013, 21 when a subpostmaster complained through the Horizon 22 service helpline. To carry on my working example, if 23 the hypothetical branch tried to balance in trading 24 period 9 of 2013, Horizon Online would continue to show 25 the local suspense account with the £1,000 loss from 69 1 trading period 9 of 2011. You will hear evidence in due 2 course on Fujitsu's investigation of this problem, which 3 it found affected 14 branches. You will hear evidence 4 on how the 2012 discrepancies were dealt with at the 5 time. You will wish to consider how long this bug 6 occurred, being caused by an intended fix to 7 an archiving strategy, and why it was not identified 8 earlier. You will wish to investigate who knew what and 9 when about those problems. 10 In the last few minutes I have summarised four bugs 11 from a list of 25 identified by Mr Justice Fraser. You 12 will hear evidence, I repeat, on more bugs, errors and 13 defects in due course. This summary, however, gives 14 a flavour of the varied ways in which the integrity of 15 Horizon could be called into question. You will wish to 16 consider what the relevant parties did with the 17 knowledge that they did have about these bugs, errors 18 and defects, both collectively and individually. 19 I now turn to the issue of the resolution of 20 disputes between the Post Office and subpostmasters. 21 SIR WYN WILLIAMS: Mr Beer, before you do that, could you 22 just tell me whether I look any differently on the 23 screen, in terms of colouring, et cetera, because some 24 of the lights have just gone out in my house. It 25 doesn't matter if I look as I started this morning but 70 1 I just wanted you to tell me. 2 MR BEER: Sir, you look as you always do. 3 SIR WYN WILLIAMS: Thank you. 4 MR BEER: Can I turn to the resolution of disputes between 5 Post Office and subpostmasters. This is part of 6 issue 41 to 48, and the issues you will be asked to 7 consider are: what practices and procedures were in 8 place during the relevant period, regarding disputing 9 shortfalls, discrepancies and transaction corrections; 10 who was responsible for conducting the investigation 11 into the disputed sums and what their qualifications 12 were for the role that they were performing and whether 13 they were adequate; the factors that influenced the 14 scope of the enquiries and the conclusions that were 15 reached, including whether financial considerations 16 played a role; and whether there were circumstances 17 where authorisation was given to place disputed items 18 into a central suspense account and, if so, whether the 19 procedure should have been adopted as a matter of 20 course. 21 Later in the Inquiry, in Phase 7, you will consider 22 whether the current procedures for disputing shortfalls, 23 discrepancies and transaction corrections are adequate. 24 At its core is this question: were subpostmasters 25 given a fair procedure for disputing sums of money that 71 1 the Post Office claimed were owed to it? You will wish 2 to consider in answering the questions I've just listed 3 the evidence that you have heard in the human impact 4 hearings of individual accounts on how the disputes 5 process was handled. You will also hear evidence from 6 employees of the Post Office and Fujitsu, who played 7 a role in evaluating the validity of individual cases. 8 I'm going to outline a number of separate issues as 9 part of this part of the opening: first, the contractual 10 obligations that subpostmasters had and the 11 Post Office's general policy on losses; second, what it 12 meant to select "settle centrally" at the end of 13 a trading period; third, what transaction corrections 14 were and the process for disputing them; fourth, the 15 role of investigation; and, fifth, I'll finally touch 16 briefly on the role of audits. 17 So, first, contractual obligations and policies on 18 losses. 19 The starting point for dispute resolution is what 20 the Post Office considered its contractual position to 21 be. At its core was the position that the subpostmaster 22 was liable for any shortfalls or discrepancies showing 23 as a loss in his or her branch. This position was 24 maintained on the basis that, if it appeared on the 25 system and was not subject to a transaction correction, 72 1 then a loss existed. This loss had to be accounted for 2 by the subpostmaster and it had to be made good. 3 These positions were firmly routed in the Post 4 Office's policies and practices towards subpostmasters. 5 Turning, for example, to the Post Office's "Losses 6 Policy -- Overarching (Branches)" of 2006, if we can 7 look at POL00030562 and turn to page 5, we can see, if 8 you scroll down, please, at the foot of the page under 9 "Section 2 -- Liability": 10 "In general, agents are liable for all losses, 11 including counterfeits, under their contractual 12 responsibility. DMB staff [that's directly managed 13 branch staff] are covered by the conduct code." 14 This particular expression of the policy is from 15 2006 but it reflects the general position. 16 You will also recall that this was the Post Office's 17 firm position in the Group Litigation. You will hear 18 evidence as to what this deep-seated position meant when 19 it came to challenging the shortfalls showing on the 20 Horizon System. 21 That document can come down. 22 As part of Phase 4, which I will come to later, you 23 will go on to consider the civil actions taken against 24 subpostmasters to recover these losses and will consider 25 the Post Office's decisions to prosecute individuals for 73 1 theft and false accounting, on the basis of the data 2 shown on Horizon. These positions, again, were all on 3 the basis that the Horizon data showed an actual loss 4 that had to be accounted for. It's the thread that runs 5 through the entirety of this Inquiry. 6 I turn secondly to consider the meaning of "settle 7 centrally". 8 The real sting in the tail to the principle that 9 subpostmasters were responsible for losses shown on 10 Horizon was the obligation imposed on them to accept 11 those losses at the end of a trading period. As found 12 by Mr Justice Fraser in the common issues trial and as 13 I mentioned a moment ago, it is accepted that, following 14 the IMPACT programme under Legacy Horizon, 15 a subpostmaster had two options at the end of a trading 16 period: settle centrally or make good the discrepancy 17 with cash. There was no option to indicate that 18 an amount was disputed on the Horizon System itself. 19 You will hear evidence about the process by which 20 disputes were raised by subpostmasters when a shortfall 21 or discrepancy arose. 22 By way of example, in 2009, the branch improvement 23 and liaison manager, Andy Winn, issued guidance on what 24 "settle centrally" meant. That's at POL00032558. The 25 Inquiry has sent a request for evidence to Mr Winn and 74 1 so, in due course, you will have his evidence on what 2 his guidance note was intended to achieve but we can 3 understand a little from the document's plain English. 4 There's a section which says: "What happens when you 5 'settle centrally'. This stated: 6 "If you have a loss or gain in your branch and 7 choose to 'settle centrally', this means that you accept 8 the loss or gain and your branch is returned to 9 balance", and then placed in brackets, "(unless you 10 follow the dispute process)." 11 The guidance went on to say that once "settled 12 centrally" has been selected the loss is transferred to 13 the "customer account". It then said: 14 "The customer account is managed by Product and 15 Branch Accounting, and we then start the debt recovery 16 process to recover the outstanding amounts." 17 In other words, unless you raise a dispute, the Post 18 Office's debt recovery process is instantly engaged. 19 From that moment onwards, the shortfall was treated as 20 a debt owed by the subpostmaster. 21 The guidance plainly discouraged subpostmasters from 22 trying to dispute discrepancies. Under a heading 23 "Resolving branch discrepancies", Mr Winn wrote: 24 "It is your responsibility to resolve branch 25 discrepancies. If you believe a transaction correction 75 1 is needed to resolve the discrepancy you should contact 2 the appropriate department in Product and Branch 3 Accounting via the NBSC." 4 As I have already explained, the NBSC, the Network 5 Business Support Centre, was the Post Office's telephone 6 support service. So the same team that was supposed to 7 offer advice and assistance was charged with resolving 8 disputes between the subpostmaster and the Post Office. 9 The guidance went on to inform subpostmasters that 10 they could make written submissions if their disputed 11 discrepancy was not allowed and: 12 "... the debt recovery process will then be 13 suspended pending a written response." 14 To be clear, the debt recovery process was not 15 suspended pending the determination or subject to any 16 formal written appeals process. It was said to be 17 suspended pending a written response. The written 18 response, it can only be assumed, would be sent from the 19 relationship manager to whom letters were to be 20 addressed when raising a dispute. 21 As you have heard, many subpostmasters felt that the 22 process for disputing a discrepancy lacked any kind of 23 transparency or due process and you may wish to consider 24 whether the process set out in the guidance note, 25 alongside the further evidence that you will consider, 76 1 enabled subpostmasters to have any real chance at 2 successfully disputing a discrepancy. 3 Can I turn to transaction corrections. You have 4 heard me mention the term "transaction corrections" 5 a number of times already. They were the method by 6 which the Post Office could remedy discrepancies on 7 Horizon that it accepted to be inaccurate. I have 8 already mentioned the incidences involving Camelot 9 transactions. As set out in the guidance produced by 10 Mr Winn, they could be requested by subpostmasters 11 should they wish to dispute a discrepancy. 12 A number of issues with the process of issuing 13 transaction corrections were documented over the years 14 and I'm going to use one of the reviews of a transaction 15 process as an example. 16 In October 2007, a document entitled "Transaction 17 Corrections Process Review for Agency Branches" was 18 issued by the Post Office. That's at POL00039024. It 19 explained that the Product and Branch Accounting Team's 20 objective was to balance the ledgers between clients and 21 Post Office branches. It acknowledged that: 22 "... how if any discrepancies are found during the 23 process of matching the [client] data, a transaction 24 correction is issued to the relevant Post Office to 25 rectify the account. This usually has a financial 77 1 impact on the branch, either by the subpostmaster having 2 to make good any shortfall in cash ..." and then it 3 continued. 4 The document went on to identify issues with the 5 process for issuing transaction corrections. They 6 included, firstly, the timeliness of transaction 7 corrections. The document highlighted that in some 8 cases it had taken two years for transaction corrections 9 to have been issued to subpostmasters. It stated that: 10 "This leaves the subpostmaster feeling frustrated 11 that they are being notified to rectify a mistake that 12 they may not remember, or where the evidence has been 13 destroyed that would support a dispute to the 14 transaction." 15 The Inquiry may agree that this is an entirely 16 understandable reaction as to why postmasters might feel 17 that way. 18 Secondly, however, the process for disputing the 19 transaction correction was subject to criticism on the 20 basis that it appeared to be too lenient to 21 subpostmasters. It says in the document: 22 "The current process for disputing transaction 23 corrections allows the subpostmaster to challenge the 24 error at every stage of the process, even after pressing 25 the button on the Horizon System to settle the debt 78 1 centrally. This delays the process in recovering any 2 outstanding monies, and can be used as a deliberate 3 delaying tactic in order to delay making payment." 4 It is important to note two points. First, of 5 course, that the subpostmaster had no option but to 6 settle centrally or make the discrepancy good at the end 7 of the month in order to continue trading. Secondly, 8 the delay that would have been experienced on account of 9 this system, in respect of debt recovery, would have 10 been a matter of weeks, yet the key concern appears to 11 have been the delay in recovery, rather than in 12 ascertaining whether the subpostmaster was in fact 13 correct. It was also felt that having to refer the 14 dispute to a team outside of Product and Branch 15 Accounting was further contributing to the delay. The 16 report recommended that this referral to an outside team 17 be removed, and any dispute be returned to the person 18 who had issued the correction. 19 The third issue to be raised was the timeliness of 20 recovering debt. While this was the subtext of the 21 second concern voiced, it was also the more explicit 22 concern of the third issue voiced on transaction 23 corrections. It was felt, according to the report, that 24 the need to issue "a piece of paper" to recover debts 25 from subpostmasters when they had elected to settle 79 1 centrally was "resource hungry" and caused further 2 delay. It also described how subpostmasters had the 3 opportunity to delay the recovery of debt for 27 days if 4 they settled centrally. 5 It's clear from this document that, notwithstanding 6 the ability to dispute a transaction correction, the 7 Post Office viewed any discrepancy or shortfall in the 8 form of a loss showing on Horizon as a debt, and that 9 the dispute process merely delayed the recover of that 10 debt. 11 After this review in 2007, the process of 12 transaction corrections was changed. As of 2011, the 13 process was captured in a slide show at POL00039038. It 14 needn't be displayed. The process remains similar to 15 what it was before, but the need to refer the dispute to 16 another team was removed. As I've explained, the first 17 part of the process was comparing Horizon data with that 18 of the Post Office's clients. The general position was 19 that the Horizon data was assumed to be incorrect where 20 it did not match the client's data, and a transaction 21 correction was issued accordingly. We will be asking 22 witnesses whether the same deference was accorded to 23 subpostmasters and if not, why not. 24 It appears from this document that some 25 subpostmasters referred to in this context are called 80 1 "multiple". I pause there as I wish to suggest that you 2 may wish to consider whether language used to describe 3 people involved had any impact on how they were 4 perceived by those tasked with assisting and 5 investigating them. Where a subpostmaster was issued 6 with a transaction correction which they disputed, they 7 could gather evidence in order to dispute it. In 8 response, having been referred back to the person who 9 issued the transaction correction, that person had three 10 options: one, agree the dispute and issue a reversal 11 transaction correction; two, disagree the dispute and 12 the transaction correction would stand; or 3, request 13 more evidence from the branch. 14 As a result of this process, the person who issued 15 the original transaction correction, a member of the 16 Product and Branch Accounting Team had a great deal of 17 power in assessing whether a transaction correction 18 should stand. They were ultimately able to decide 19 whether to permit the subpostmaster's challenge or to 20 refuse it. It was in their discretion to decide whether 21 to give it the postmaster the opportunity to further 22 substantiate their case and, as set out in Mr Winn's 23 document, an appeal could be made to Mr Winn -- the same 24 Mr Winn who suit the settle centrally guidance. At that 25 stage, the subpostmaster was supposed to submit the 81 1 appeal in writing with "all the evidence available." 2 We have asked Mr Winn about the appeal process that 3 he oversaw, and you will hear evidence about that in due 4 course. 5 As part of this area of investigation, you will wish 6 to consider whether the transaction correction process 7 worked as it should, whether it was accessible to 8 subpostmasters and whether it was a fair procedure, and 9 you will hear evidence on the issue on whether, in 10 practice, it required to a postmaster to defend 11 a transaction correction. 12 Can I turn to investigations that were carried out 13 by the Post Office in order to resolve a dispute that 14 had arisen between a subpostmaster and the Post Office, 15 and can I consider two forms of investigation. First, 16 where a dispute was made in relation to a discrepancy to 17 the NBSC or made clear their dispute in writing; second, 18 where a dispute was not made through the official 19 channels but which surfaced as part of the debt recovery 20 process. 21 I'll come to the use of audits in due course. 22 However, for the purposes of Phase 3, our attention will 23 be on disputes that arose before the audits occurred or 24 which arose independently of them. 25 Turning to the first scenario, if a dispute was 82 1 communicated to the NBSC teams, then the operatives 2 could contact Fujitsu to see if there were any 3 identifiable issues with the function of Horizon in that 4 particular branch. You'll hear evidence about how the 5 NBSC dealt with these issues being raised and how they 6 communicated with the Products and Branch Accounting 7 team in relation to debt recovery. You will also 8 consider evidence about how the Post Office ultimately 9 decided to resolve the complaints and whether the 10 process was transparent and fair. 11 I will not deal with this now as there are differing 12 accounts as to how this worked in practice, and the 13 Inquiry is still in the process of gathering evidence on 14 the issue. 15 If no dispute was made to the NBSC or using the 16 transaction correction process, then the assumption was 17 that a debt existed and was to be repaid to the 18 subpostmaster. This seems to have been the case even 19 where the application of basic common sense would have 20 dictated that something had gone terribly wrong. 21 Picking just one example of this, can we look at 22 POL00004403. 23 In this case, the branch which had been issued with 24 a number of transaction corrections relating to the 25 National Lottery (that's the Camelot issue to which 83 1 I have already referred) raised a point. In an email of 2 8 February 2007, a member of the debt recovery section 3 of the Products and Branch Accounting team, Jacqueline 4 Whitham -- you'll see her name at the top of the page -- 5 gave an overview of the problem. She summarised in the 6 second paragraph that while a transaction correction for 7 the lottery had been issued for a credit of £22,778.40, 8 that credit had been "eaten up" or eaten into by a 9 lottery transaction correction which was a debit for 10 £34,028. 11 You will note that these transaction corrections, 12 some of which we know were issued up to two years after 13 the transactions to which they relate, are for extremely 14 significant sums of money, and they would be large sums 15 of money given that this branch in question was not 16 a particularly large one and was run by a family, like 17 many post offices. 18 If we look further down the page, under the -- 19 that's it, thank you -- we can see that the email before 20 was sent by a Neil Barnard, who visited the branch to 21 investigate the discrepancies that existed, and in this 22 email Mr Barnard is requesting advice. We can see that 23 from that last paragraph on the screen there: 24 "Although I have no previous knowledge of the 25 branch, it would appear that the branch has been naive 84 1 in accepting all of the above without question and 2 without any supporting evidence. As things stand, they 3 will end up paying half of their remuneration back to 4 cover these repayments, which would certainly affect the 5 viability of the branch." 6 The obvious question is why this absurd position had 7 not been picked up before. Looking further back in the 8 email chain, which I won't do now, we can see that 9 Mr Barnard was asked to investigate because the branch 10 was already repaying an existing debt when a new debt 11 was added to what was owed. 12 In the chain, we can see that a Mr Brian Trotter, 13 who held the position of contract service manager, had 14 sent an email requesting that Mr Barnard look into the 15 position. We've sent a Rule 9 request to Mr Trotter, so 16 in due course you will hear his evidence as to what the 17 general practice was in cases like this. 18 In this particular case, the email sets out what he 19 thought. He said: 20 "I think this warrants further investigation. Can 21 you contact the branch advise [sic] that because a debt 22 is already being repaid, this debt will need to be 23 settled in full immediately. If the branch is not in 24 a position to repay, I may have to consider their 25 contractual position." 85 1 We can infer that what Mr Trotter refers to as the 2 "contractual position" means the potential to terminate 3 the subpostmaster's appointment and so, even before an 4 investigation has been carried out, Mr Trotter's 5 position appeared to be that the subpostmaster's 6 position may be vulnerable if they do not repay the debt 7 in full. And so stepping back as part of your 8 enquiries, you will wish to consider whether putting the 9 onus on subpostmasters to dispute discrepancies or 10 transaction corrections was fair or appropriate and, as 11 part of that, you will wish to take into account the 12 balance of power as between the Post Office and 13 subpostmasters, together with each of those parties' 14 access to relevant information, as to the veracity and 15 accuracy of the losses that were shown. 16 I turn briefly to mention audit, which you will 17 consider as part of Phase 4 of the Inquiry. You have, 18 of course, also heard evidence during the human impact 19 hearings as to how subpostmasters felt they were treated 20 by the auditors and how experienced the people carrying 21 out the audits were. You will hear further evidence 22 about audits, how they were carried out, and you will in 23 particular -- and when they were carried out -- and you 24 will wish to consider whether the process was fair and 25 whether it was adequate. 86 1 You will also consider the mechanisms by which the 2 Post Office kept track of what the audits revealed and 3 whether they took action in response. For example, in 4 October 2004, a confidential report was written on 5 branch auditing for the sixth period of the 2004/05 6 financial year. Can we look at that, please. It's 7 POL00047544. 8 In the first line of the executive summary at the 9 foot of the page, it was identified that a loss from 10 cash accounts from the first six months of the year 11 amounted to £2.8 million from approximately 1,000 12 audits. Of that £2.8 million of loss, £1.9 million was 13 as a result of audits carried out in just 20 branches. 14 In the context of puzzling over how this could be, the 15 report observed: 16 "Although in some of these cases, there were 17 indicators of errors being made which would be rectified 18 by an error notice, there is also a significant risk 19 that the losses identified in most of these cases will 20 not be [covered]. It is also a concern that in spite of 21 the size of the amounts of discrepancies, 22 a precautionary suspension was not made in 35% of these 23 cases." 24 The assumption appears to be that even though it 25 seems as though errors have been made, the Post Office 87 1 is significantly out of pocket. It also seems to be 2 a concern that suspensions were not made as a rule, 3 simply on the basis of the size of the discrepancy 4 identified in the branch. 5 Turning if we can to the foot of page 2, a table 6 begins and we're going to look at this over the next 7 page. The following table details the 20 audits 8 undertaken in 2004/05 that have revealed losses in 9 excess of £25,000. 10 Thank you. And if we look at that and if we just 11 scroll down, we see a list of all of the branches where 12 losses were found in excess of £25,000. In some cases, 13 specific reasons were given, including "System issues 14 relating to bureau claimed" and in other instances 15 simply "£59,000 declared shortage not made good" or 16 "Cash figure inflated". There doesn't appear, at least 17 in this report, to have been any appetite to get to the 18 bottom of the reason why these losses may have been 19 found. 20 You will hear further evidence on the approaches 21 taken by the Post Office, both on a general level and in 22 respect of individual audits. You will wish to consider 23 whether they were conducted effectively and fairly and 24 in the knowledge of the fact that Horizon was not 25 infallible. 88 1 That's all I wish to say at the moment about Phase 3 2 of the Inquiry. Can I turn to the Inquiry's remaining 3 phases. 4 I have spent a great deal of time addressing 5 Phases 2 and 3 of the Inquiry because those are the 6 phases that will be heard over the coming months. The 7 Inquiry has disclosed a great deal of documents and 8 witness statements covering those phases and we will 9 continue to do so. 10 However, over the course of the next year, you will 11 be hearing evidence relating to Phases 4 to 7. Phase 4 12 will address action taken against subpostmasters and 13 others. It will address policy making, audits and 14 investigations, civil and criminal proceedings, 15 knowledge of and responsibilities for failures in 16 investigation, and disclosure. 17 Phase 5 will address the issues of redress, access 18 to justice, the Second Sight review and report, the 19 Complaint Review and Mediation Scheme, the conduct of 20 the Group Litigation, and responding to the scandal and 21 compensation schemes. 22 Phase 6 will address governance, the monitoring of 23 Horizon, contractual arrangements, internal and external 24 audit, technical competence, stakeholder engagement, 25 oversight and whistleblowing. 89 1 Phase 7 will address current practice and procedure 2 and the recommendations for the future. 3 You will hear from a wide range of witnesses from 4 the Post Office, from Fujitsu, from subpostmasters, for 5 the NFSP, from Government, from Second Sight, from 6 investigators, from lawyers, and other senior and legal 7 political figures. You will also hear from Duncan 8 Atkinson, King's Counsel, an expert who has been 9 instructed by the Inquiry to assess the Post Office's 10 investigations and its prosecutions' policies and 11 practices, and to analyse certain cases that you have 12 selected. 13 In opening these phases today, I will identify, 14 broadly chronologically, some of the key milestones in 15 respect of advice and investigation that cut across 16 Phases 4 to 6. Each of the events that I will address 17 today played their own part in defining or challenging 18 the approach that was taken by the Post Office and by 19 the Government, including by or on behalf of senior 20 executives and ministers towards subpostmasters, their 21 attitude towards appeals, towards litigation, and 22 towards compensation. 23 However, first, I'll briefly remind you, sir, of the 24 various strands of litigation and criminal appeals that 25 are the backdrop to these issues. I should say that if 90 1 it's not obvious to you from what I've said already, 2 that this part of my opening is less detailed and more 3 light touch, as the Inquiry is still very much in the 4 evidence gathering stage. 5 So litigation and appeals, the Group Litigation. 6 I turn first to the Group Litigation that led to various 7 judgments of Mr Justice Fraser. Those findings are what 8 the Inquiry uses as the starting point for its own 9 investigations and the bedrock upon which we direct our 10 enquiries. 11 The catalyst that led to the commencement of the 12 Group Litigation was the formation of the Justice for 13 Subpostmaster Alliance, referred to as the JFSA, who had 14 their first meeting in November 2009. At that first 15 meeting as we heard during the human impact phase, 16 involved some 30 subpostmasters. It grew significantly 17 under the leadership of Alan Bates, who campaigned and 18 who continues to campaign for fair compensation for 19 subpostmasters. 20 The JFSA was instrumental in the Mediation Scheme 21 that was set up in 2012 that I will mention in a moment. 22 It was the JFSA who managed to secure the services of 23 a law firm, and to obtain funding to bring claims in 24 2015. Claims were eventually made by 555 individuals, 25 the vast majority of whom were subpostmasters, but some 91 1 of which were crown employees. 2 These individuals sought to have the claims brought 3 together and managed under a Group Litigation Order, 4 a GLO. As you know, GLO is ordered where there are 5 common issues of fact and law across a large number of 6 claims. In these instances, the Civil Procedure Rules 7 in this country acknowledge that it makes sense for 8 those claims to be managed together and for special 9 arrangements to be made to manage the litigation 10 proportionately, such as the selection of test claims, 11 as opposed to hearing evidence relating to each claim 12 individually and separately. 13 On 22 March 2017, Senior Master Fontaine made a GLO 14 and the claims proceeded to be managed together with 15 Mr Justice Fraser as the managing judge. 16 Over the course of the Group Litigation, 17 Mr Justice Fraser produced six judgments in total. Most 18 of these related to procedural issues rather than going 19 to the substance of the claim. 20 The critical substantive judgments are the third and 21 sixth of the judgments referred to as the "Common Issues 22 Judgment" and the "Horizon Issues Judgment" 23 respectively. 24 It's helpful to set out, briefly, the key issues 25 that were considered in each of those judgments. In the 92 1 Common Issues Judgment they were: (i) the enforceability 2 of some contractual terms in some of the contracts; (ii) 3 whether the contract between subpostmasters and the Post 4 Office formed a "relational contract" which implied 5 a duty of good faith on both parties; and (iii) whether 6 the Post Office was entitled to treat shortfalls in 7 branch accounts showing on the Horizon System as a debt 8 without further investigation. 9 It's fair to say that Mr Justice Fraser resolved all 10 of these issues in favour of the subpostmasters' 11 position, and this was a substantial blow to the Post 12 Office's defence. You will be aware that following 13 this, during the Horizon Issues trial, an unsuccessful 14 application was made to Mr Justice Fraser to recuse 15 himself. 16 Among Mr Justice Fraser's findings at this stage was 17 that the Post Office, in demanding repayment of 18 a shortfall shown by Horizon, had misstated the factual 19 and legal liability of a subpostmaster to make good any 20 losses. He described the Post Office's behaviour as 21 "oppressive". 22 Turning, then, to the Horizon Issues Judgment, the 23 key issues considered as part of this judgment were 24 firstly the presence of bugs, errors and defects which 25 were in fact present in the Horizon System, and over 93 1 what time. Secondly, whether Legacy Horizon or the 2 first iteration of Horizon Online, was robust. Third, 3 whether Fujitsu were able remotely to access a branch's 4 data and inject or alter the data remotely. Fourth, 5 whether adequate records were kept to substantiate the 6 losses claimed. Fifth, whether adequate investigations 7 took place to identify and remedy errors, bugs and 8 defects. 9 Mr Justice Fraser's judgment in this regard was 10 again highly critical of the Post Office's conduct. He 11 found that there were numerous bugs, errors and defects 12 in Horizon which were capable of causing, and in fact 13 did cause, shortfalls in Post Office branches. He found 14 that the evidence he had heard established 25 different 15 bugs with the potential to impact upon branch accounts, 16 with evidence of actual lasting impact having occurred 17 as a result of 22 of them. 18 Horizon itself did not alert subpostmasters to the 19 existence of any such bugs, errors or defects he found. 20 His conclusions included the following: first, it was 21 possible for bugs, errors and defects of the nature 22 alleged by the claimants to have the potential both (a) 23 to cause apparent or alleged discrepancies or shortfalls 24 relating to subpostmasters' branch accounts or 25 transactions, and also (b) to undermine the reliability 94 1 of Horizon accurately to process and to record 2 transactions as alleged by the claimants. 3 Two. All the evidence in the Horizon Issues trial 4 showed not only was there the potential for this to 5 occur, but that it actually had happened, and on 6 numerous occasions. This applied both to Legacy Horizon 7 and also Horizon Online. 8 Mr Justice Fraser thirdly accepted the claimants' 9 submissions that, in terms of likelihood, there was 10 a significant and material risk on occasion of branch 11 accounts being affected in the way alleged by the 12 claimants by bugs, errors and defects. 13 Fourth, in his judgment, there was a material risk 14 that such a shortfall in a branch's accounts was caused 15 by the Horizon System during the years when both Legacy 16 Horizon and Horizon Online were in use, which is 2000 to 17 2010, and then 2010 to 2017 respectively. 18 There was a material risk -- fifthly -- for errors 19 in data recorded within Horizon to arise in data entry, 20 in transfer, or in processing of data in Horizon, in 21 both Legacy Horizon and in Horizon Online. 22 Importantly, Mr Justice Fraser also found first that 23 the Post Office had access to the causes of the alleged 24 shortfalls in branches, including whether they were 25 caused by errors, bugs or defects in Horizon, albeit 95 1 that they would also rely on Fujitsu to undertake any 2 investigations; and secondly, that Fujitsu had the 3 ability and facility to insert, inject, edit or delete 4 transaction data or data in branch accounts, to 5 implement fixes in Horizon that had the potential to 6 affect transaction data or data in branch accounts, or 7 to rebuild branch transaction data, all without the 8 knowledge or consent of the subpostmaster in question. 9 If Fujitsu injected a transaction into a branch 10 account this "would look as though the subpostmasters 11 had done it." 12 That's paragraph 1004 of his judgment. 13 He concluded that Legacy Horizon was "not remotely 14 robust. The number, extent and type of impact on the 15 numerous bugs, errors and defects that I have found in 16 Legacy Horizon makes this clear." 17 That's paragraph 975. 18 HNG-X was slightly more robust, but still had 19 a significant number of bugs, errors and defects, 20 particularly in the period 2010 to 2015. 21 The litigation was settled shortly after the Horizon 22 Issues Judgment was handed down, and I'll come to speak 23 about that settlement in a moment. 24 It is worth noting that whilst some of these issues 25 touched upon the conduct of Fujitsu, Fujitsu was not 96 1 itself a party to the litigation. It is of course 2 a Core Participant in this Inquiry, and we will be 3 investigating much more fully the role that Fujitsu 4 played, including in respect of the evidence that was 5 and was not relied upon in the litigation. 6 In terms of the settlement, the Group Litigation was 7 brought to an end by a Deed of Settlement dated 8 10 December 2019. The Deed of Settlement made clear 9 that none of its terms were to be construed as an 10 admission of liability, and that the terms of the 11 settlement were to be "in full and final settlement" of 12 all of the claims made by the claimants, save for claims 13 brought for malicious prosecution, which was defined in 14 some narrow terms. 15 By clause 2.1 of the settlement, the Post Office 16 agreed to make settlement payments which, in aggregate, 17 amounted to £57.75 million. Of that sum, £15 million 18 was earmarked for the legal costs of the solicitors and 19 barristers who had acted for the claimants in the Group 20 Litigation. £42 million was paid over "by way of 21 damages, litigation funding, after-the-event costs or 22 other costs or other relief claimed in the action." 23 However, as has been widely reported, only 24 £10.5 million of that £42 million was shared between the 25 claimants as compensation for the losses which they 97 1 claimed in the litigation. A very substantial 2 proportion of the settlement payment was swallowed up in 3 litigation funding and other costs. 4 Most, if not all, of the claimants received a sum by 5 way of compensation that was substantially less than the 6 alleged losses which they had claimed in the Group 7 Litigation. 8 You, sir, have already begun your investigation into 9 the various compensation schemes that have been put in 10 place since then, namely: the Historical Shortfall 11 Scheme; secondly, a scheme referred to as the Overturned 12 Historic Convictions Scheme, which was established to 13 provide interim and final payments for subpostmasters 14 convicted on the basis of evidence generated by Horizon, 15 and whose convictions have been quashed; and, thirdly, 16 a scheme called the Group Litigation Scheme, which is 17 under development to provide further compensation for 18 all the claimants in the Group Litigation who are not 19 eligible for compensation under the overturned historic 20 convictions scheme. 21 You have expressed concerns about the progress 22 that's being made in this respect, and on 15 August 23 issued a progress update which addressed delays in 24 determining certain aspects of the HSS and the 25 amendments that should be made to it, including in 98 1 relation to legal representation. You stressed the need 2 for progress on the Group Litigation Scheme, and address 3 other aspects of that scheme, such as interim payments, 4 and, finally, your update also addressed the Overturned 5 Historic Convictions Scheme and the need for an 6 independent person or panel to determine claims and 7 resolve disputes. And you have recently announced, sir, 8 as you know, a further hearing on 8 December of this 9 year at which to monitor progress. 10 As part of Phase 5 of the Inquiry, you will examine 11 the extent to which the Post Office has delivered on its 12 commitments, and the extent to which the schemes provide 13 an adequate means for affected subpostmasters, managers 14 and assistants to obtain financial redress for the 15 wrongs that they have suffered. 16 Sir, I'm about to turn to the CCRC and the criminal 17 appeals. Might that be an appropriate moment to break 18 for lunch? 19 SIR WYN WILLIAMS: Of course, yes. We will begin again at 20 2.00 pm. 21 MR BEER: Thank you very much, sir. 22 (12.58 pm) 23 (The Short Adjournment) 24 (2.00 pm) 25 SIR WYN WILLIAMS: Thank you. 99 1 MR BEER: I was turning to the CCRC and criminal appeals. 2 The CCRC is a statutory body with the power to refer 3 criminal cases to the Court of Appeal Criminal Division, 4 where it considers that there is a real possibility that 5 a conviction may be overturned. In March 2021 the Court 6 of Appeal considered 42 convictions that had been so 7 referred, following the judgments by Mr Justice Fraser. 8 As you know, there were two grounds of abuse of 9 process that were pursued before the Court of Appeal as 10 grounds of appeal: first, that the defendants could not 11 have a fair trial; and, secondly, that his or her trial 12 was an affront to the conscience of the court. 13 The Court of Appeal, having considered the judgments 14 of Mr Justice Fraser and the individual circumstances of 15 the cases before the court, held that the failures in 16 investigation and disclosure were such as to mean that 17 a fair trial was not possible in any of the cases where 18 Horizon data had been essential to the prosecution. 19 That constituted all but three of the appeals before it. 20 Moreover the court found that: 21 "The failures of investigation and disclosure were 22 ... so egregious as to make the prosecution of any of 23 those cases an affront to the conscience of the court." 24 So in all but three cases the appellants' 25 convictions were quashed. Further appeals have 100 1 consequently taken place in respect of more 2 subpostmasters and others who were convicted, and 3 further convictions have been quashed and continue to be 4 quashed. 5 With that criminal and civil litigation in mind the 6 key milestones in advice and investigations that I will 7 address over the remainder of today, although no doubt 8 there will be others in due course, are as follows: 9 firstly, the Helen Rose Report, a 2013 report by the 10 Post Office's security fraud analyst, which touched on 11 Horizon integrity issues. 12 Secondly, the Second Sight Interim Report, a 2013 13 report by forensic accountants, which, on an initial 14 review, did not identify systemic issues with Horizon, 15 but which identified bugs and was critical of the Post 16 Office's handling of its investigation. 17 Thirdly, the Clarke Advices, namely advice from 18 Simon Clarke, a barrister at the Post Office's 19 solicitors, Cartwright King, again in 2013. A first 20 significant advice addressed to the reliance on Gareth 21 Jenkins as an expert witness in Post Office prosecutions 22 will be considered and a second advice concerning the 23 need to record and retain information. 24 Fourth, the Second Sight Report itself, which was 25 finally completed on 9 April 2015, and which, amongst 101 1 other things, was critical of the access that was 2 provided by the Post Office to documents that were 3 considered necessary for the purposes of that 4 investigation. 5 Fifth, various advices from Brian Altman King's 6 Counsel in the period 2013 to 2015, which addressed the 7 review being carried out by Cartwright King, which 8 addressed advice in relation to mediation, advice on the 9 Post Office's prosecution role and advice on the 10 charging of theft and false accounting. 11 Sixth, advice from Jonathan Swift, now Sir Jonathan 12 Swift, and Christopher Knight in 2016, that formed 13 a review on behalf of the then chairman of Post Office, 14 Tim Parker, concerning the steps taken in response to 15 complaints by subpostmasters. 16 Seventh, various advice given by Mr Altman in the 17 period from 2016 onwards, which followed the Swift 18 review, addressing Post Office's criminal prosecutions 19 and advice on the judgments of Mr Justice Fraser and 20 their implications for the safety of convictions. 21 Then eighth, advice from various legal professionals 22 in respect of the Group Litigation. 23 Of course, the story of wide scale and executive 24 level knowledge can be traced further back than these 25 reports. In 2009, in Rebecca Thomson's Computer Weekly 102 1 article, she referred to problems with Horizon. In the 2 same year, two Members of Parliament reported their 3 constituents' concerns about Horizon to the Minister of 4 Postal Affairs, who in turn forwarded their letters to 5 the managing director of the Post Office. 6 You, sir, will wish to investigate those early 7 reports and examine the response to them. 8 As I have already discussed in relation to Phase 3, 9 this will include the August 2010 report by Mr Ismay 10 entitled "Horizon -- Response to the Challenges 11 Regarding Systems Integrity". 12 The Inquiry will investigate why little appears to 13 have been done in the intervening period before the 14 reports, the eight reports, and advices which I now turn 15 to address. 16 First, the Helen Rose Report. On 12 June 2013, 17 Helen Rose wrote a report in respect of Horizon Issues 18 at the Lepton Branch. We needn't turn it up but that's 19 POL00030214. Helen Rose was a Post Office security 20 fraud analyst who was looking into a transaction 21 correction at the branch because the postmaster had 22 denied reversing a transaction for £76.09 and who had 23 involved a forensic accountant as he believed his 24 reputation was in doubt. 25 The report included the contents of a series of 103 1 emails between Ms Rose and Gareth Jenkins, whom I've 2 already mentioned and we will come to again shortly, 3 because, in addition to having significant input into 4 the Horizon system as an employee of Fujitsu, he was 5 also an expert witness used in the Post Office's 6 prosecutions of subpostmasters. 7 During the course of her investigation, on the 8 30 January 2013, Gareth Jenkins had stated in an email 9 to Ms Rose that "It isn't clear what failed" in respect 10 of the Lepton Branch, and an email from Ms Rose on 11 13 February 2013 included the following important 12 sentence: 13 "I know you are aware of all the Horizon integrity 14 issues." 15 Whilst Ms Rose concluded that the system in that 16 case had behaved as it should, she expressed concerns 17 that: 18 "We cannot clearly see what has happened on the data 19 available to us and this in itself may be misinterpreted 20 when giving evidence and using the same data for 21 prosecutions." 22 The recommendation was change the logs so that 23 "system created reversals are clearly identifiable". 24 As I will come to explain, the content of those 25 underlying emails and Ms Rose's report was later seen to 104 1 be significant by Simon Clarke, the barrister at 2 Cartwright King solicitors, who was concerned about the 3 conduct of the Post Office's prosecutions. 4 Second, then, the interim report of Second Sight. 5 In May 2012, following intervention by James Arbuthnot, 6 now Lord Arbuthnot, the Post Office agreed to engaged 7 a firm of forensic accountants to review Horizon. 8 Following discussions involving the Post Office's senior 9 manager, Lord Arbuthnot and Alan Bates and Kay Linnell 10 of JFSA, Second Sight Support Services Limited, which 11 I'm going to call "Second Sight", were appointed to 12 carry out the review. The investigators were 13 Ian Henderson and Ron Warmington. 14 It's worth noting at this stage, for reasons that 15 will become clear in due course, that a paper was issued 16 by the agreement of the Post Office and the JFSA called 17 "Raising Concerns with Horizon", which sought to 18 reassure subpostmasters. That's POL00000218. It was 19 signed by the Post Office on 17 December and included 20 the following paragraph: 21 "In order to carry out the Inquiry, Second Sight 22 will be entitled to request information related to 23 a concern from Post Office Limited and if Post Office 24 Limited holds that information, Post Office Limited will 25 provide it to Second Sight." 105 1 The remit of the investigation was defined in Second 2 Sight's Interim Report, which is POL00029650, as 3 follows: 4 "... to consider and to advise on whether there are 5 any systemic issues and/or concerns with the Horizon 6 System, including training and support processes, giving 7 evidence, and reasons for the conclusions reached." 8 It was agreed that Second Sight's report would: 9 "... report on the remit and if necessary will 10 contain recommendations and/or alternative 11 recommendations to Post Office Limited relating to the 12 issues and concerns investigated during the Inquiry. 13 The report and recommendations are to be the expert and 14 reasoned opinion of Second Sight in the light of the 15 evidence seen during the Inquiry." 16 Second Sight had been asked to investigate 17 47 individual cases that had been submitted to either 18 the JFSA or to the office of Lord Arbuthnot and which 19 had been highly critical of the Horizon System and, in 20 many cases, the way that the Post Office had dealt with 21 the matters reported. 22 After notifying the wider Post Office Network about 23 the proposed investigation, an additional 14 cases were 24 accepted for investigation. 25 At the outset of Second Sight's report, which was 106 1 produced in July 2013, it was observed that "whilst in 2 no way minimising the potential importance of the cases 3 under review, this level of response suggests that the 4 vast majority of subpostmasters and branches are at 5 least reasonably happy with the Horizon System". 6 That observation was repeated by the Post Office and 7 others in the years that followed and the Inquiry will 8 investigate why so few individual subpostmasters came 9 forwards at that time. 10 Second Sight conducted what were called Spot 11 Reviews. That is because the investigators considered 12 that it would not be it efficient or cost effective to 13 examine all of the issues raised by subpostmasters or 14 covered in the Post Office case files. Instead the 15 investigators will conduct a "fast track" review of the 16 information available in order to identify the key 17 issues that were relevant to the remit of the 18 investigation. 19 Each issue was then dealt with as a Spot Review. 20 A case with multiple issues would give rise to multiple 21 Spot Reviews, each of which would be dealt with on 22 an individual basis. 23 The reports issued by Second Sight were issued in 24 a way that maintained the anonymity of each individual 25 subpostmaster. 107 1 Second Sight noted early on in the interim report 2 that the Post Office's responses to the Spot Reviews 3 were long and highly technical documents which in some 4 cases presented counter assertions based on the standard 5 operating procedures and controls, rather than "tangible 6 evidence" of what had actually happened. 7 The interim report addressed four spot reviews. In 8 respect of whether defects in Horizon caused some of the 9 losses for which subpostmasters and their staff were 10 blamed, Second Sight said there was still much work to 11 be done to investigate, but they were able to conclude 12 that, in one of the four cases, "although the Horizon 13 System operated as designed, the lack of timely, 14 accurate and complete information presented to the 15 subpostmaster was a significant factor in his failing to 16 follow the correct procedure". 17 That's POL00029650, at page 5. 18 In another, the Post Office made changes to the 19 relevant standard operating procedures just a few days 20 after the subpostmaster was suspended and Second Sight 21 noted that it is possible that if that change in 22 procedures had been implemented earlier, many of the 23 problems would not have occurred. 24 During the course of their investigation, the Post 25 Office had disclosed to Second Sight the existence of 108 1 "defects" in Horizon that had impacted some 76 branches. 2 This included, firstly, the receipts and payments 3 mismatch problem, that was said by the Post Office to 4 have impacted 62 branches; secondly, the local suspense 5 account problem, which was said by the Post Office to 6 have affected 14 branches; and, thirdly, one other 7 single bug in the Horizon software. 8 The report from Second Sight detailed a wide range 9 of frequently reported issues. Their conclusion in this 10 regard was pointed, stating -- and this is the same 11 reference, page 7 at paragraph 7.3: 12 "We can't help concluding that had POL investigated 13 more of the 'mysterious shortages' and problems reported 14 to it, with the thoroughness that it has investigated 15 those reported to it by Second Sight, POL would have 16 been in a much better position to resolve the matters 17 raised, and would also have benefited from process 18 improvements." 19 The authors noted that the investigation division in 20 the Post Office was not contractually required to 21 enquire into matters where crime was not suspected. 22 They noted other issues, such as complaints by 23 subpostmasters that they were only provided with a full 24 copy of their contract with the Post Office when the 25 Post Office commenced litigation against them or 109 1 recovery action against them. 2 The Interim Report's conclusions were preliminary 3 only, acknowledging that there was still much work to be 4 done. Nevertheless, the conclusions were as follows -- 5 same reference page 8: 6 First, Second Sight had so far found no evidence of 7 system-wide, systemic, problems with the Horizon 8 software. 9 Second, they were aware of two incidents where 10 defects or bugs in the Horizon software gave rise to 11 76 branches being affected by incorrect balances or 12 transactions, which took some time to identify and to 13 correct. 14 Third, occasionally an unusual combination of 15 events, such as a power or communications failure during 16 the processing of a transaction could give rise to 17 a situation where timely, accurate and complete 18 information about the status of a transaction was not 19 immediately available to a subpostmaster. 20 Fourth, when individual subpostmasters experienced 21 or reported problems, the Post Office's response could 22 appear unhelpful, unsympathetic or simply fail to solve 23 the underlying problem. The lack of a user forum or 24 similar facility meant that the subpostmasters had 25 little opportunity to raise issues of concern at 110 1 an appropriate level with the Post Office. 2 Fifth, the lack of an effective outreach 3 investigations function with the Post Office resulted in 4 the Post Office failing to identify the root cause of 5 problems and missing opportunities for process 6 improvements. 7 Sixth, the end of the trading period processes could 8 be problematic for individual subpostmasters, 9 particularly if they were dealing with unresolved 10 transaction corrections. The lack of a suspense account 11 option meant it was difficult for disputed transaction 12 corrections to be dealt with in a neutral manner. 13 On the day that the interim report was published, 14 the Post Office announced the creation of a Mediation 15 Scheme. Its press notice, having quoted from the then 16 chief executive Paula Vennells, announced as follows, 17 this is CWU00000002: 18 "... the creation of a working party to work 19 collaboratively to complete the review of cases started 20 by Second Sight last year. This would examine the 21 themes identified by Second Sight and consider all cases 22 brought forward by the JFSA and MPs, together with any 23 new themes which emerge from these cases." 24 On 26 August 2013 the Post Office made a further 25 announcement and created the initial Complaint Review 111 1 and Mediation Scheme, the objective of which was to 2 "address the concerns raised by some subpostmasters 3 regarding cases which they feel require further 4 resolution". 5 A working group, comprising the Post Office, JFSA 6 and Second Sight was established to develop and monitor 7 the scheme and Sir Anthony Hooper, a former Court of 8 Appeal judge, was appointed as the independent chair. 9 The scheme received 150 applications before the 10 deadline for applications expired on 18 November 2013. 11 There are a number of aspects of the interim report 12 that will become important parts of your investigation. 13 One of these is the interim finding by Second Sight that 14 they had so far found no evidence of system-wide, 15 systemic problems with the Horizon software. The 16 Inquiry will examine to what extent that finding was 17 used or misused by the Post Office and others to support 18 or justify their actions against subpostmasters and then 19 in litigation. 20 Can I turn to the Clarke Advices. 21 By July 2013, the Helen Rose Report and the 22 Second Sight Interim Report had been completed and it 23 became clear that there were issues with the disclosure 24 that had been given in criminal prosecutions. Simon 25 Clarke, a barrister at Cartwright King Solicitors, 112 1 became concerned about the conduct of the prosecutions. 2 On 8 July 2013, Mr Clarke advised on the need to conduct 3 a review of all Post Office prosecutions so as to 4 identify those who ought to have had the certain 5 material concerning problems with Horizon disclosed to 6 them, as well as a review of current cases where there 7 had been no disclosure when there ought to have been. 8 He indicated that the existence of bugs needed to be 9 disclosed to defendants, where the test for the 10 disclosure was met, and he set out the scope of the 11 exercise to be conducted. 12 That exercise has been referred to as the CK -- 13 referring to Cartwright King -- the CK Sift Review and 14 that reviewed all cases conducted since 1 January 2010. 15 The Inquiry will, in due course, ask to what extent 16 this exercise was truly independent and whether it was 17 sufficient in its oversight. 18 On 15 July 2013, Mr Clarke wrote an advice on the 19 continuing use of Gareth Jenkins as a prosecution 20 witness. The advice was entitled: 21 "Advice on the use of expert evidence relating to 22 the integrity of the Fujitsu Services Limited Horizon 23 system." 24 I wonder whether we could turn that up. 25 POL00006798, thank you. 113 1 I'll introduce it in summary first. 2 Mr Clarke explained in the advice that the Royal 3 Mail Group and Post Office had relied on Mr Jenkins or 4 "Dr Jenkins" or "Dr Jennings", as he is referred to by 5 Mr Clarke, for many years, and had provided many expert 6 statements in support of prosecutions, that it had 7 negotiated with and arrived at joint conclusions and 8 joint reports with defence experts and that he had 9 attended court to give evidence on oath at criminal 10 trials. Five recent examples were selected by 11 Mr Clarke. 12 Mr Clarke identified that the Helen Rose Report and 13 the Second Sight Interim Report had both raised concerns 14 concerning bugs. He then referred to a conversation on 15 27 June between the Post Office and Cartwright King, 16 which identified that some within the Post Office had 17 been aware of bugs affecting up to 30 offices. On 18 28 June 2013, Mr Jenkins confirmed that he had told 19 Second Sight about two bugs during the course of their 20 investigation. That's the receipts and payments 21 mismatch and the local suspense account bugs. 22 Mr Clarke highlighted that expert statements had 23 been provided by Gareth Jenkins in criminal proceedings, 24 all attesting to the robustness and integrity of Horizon 25 and expressed in terms and were phrased in such a way 114 1 that would drive the reader to the conclusion that there 2 must not be any bugs. 3 Can we turn to page 13 of the advice, please. 4 At paragraph 37 in his "Conclusions", Mr Clarke 5 asked "What does all this mean?" He answered his 6 question, quote: 7 "In short, it means that Dr Jennings [that's 8 Mr Jenkins] had not complied with his duties to the 9 court, the prosecution or the defence. It is pertinent 10 to recall the test under which a prosecution expert 11 labours [that's his word]: '... an expert witness 12 possessed of material which casts doubt upon his opinion 13 is under a duty to disclose the fact of the solicitor 14 instructing him, who in turns has a duty to disclose 15 that material to the defence. The duty extends to 16 anything which might arguably assist the defence. 17 Moreover, it is a positive duty." 18 His footnoted reference is to a decision of the 19 Court of Appeal in Ward. 20 In paragraph 38, Mr Clarke advised as follows: 21 "The reasons as to why Dr Jenkins failed to comply 22 with this duty are beyond the scope of this review. The 23 effects of that failure however must be considered. 24 I advise the following to be the position: 25 "[1] Dr Jenkins failed to disclose material known to 115 1 him but which undermines his expert opinion. This 2 failure is in plain breach of his duty as an expert 3 witness. 4 "[2] Accordingly, Dr Jenkins' credibility as 5 an expert witness is fatally undermined; he should not 6 be asked to provide expert evidence in any current or 7 future prosecution. 8 "[3] Similarly, in those current and ongoing cases 9 where Dr Jenkins has provided an expert witness 10 statement, he should not be called upon to give that 11 evidence. Rather, we should seek a different, 12 independent expert to fulfil that role. 13 "[4] Notwithstanding that the failure is that of 14 Dr Jennings and, arguably, of Fujitsu Services Limited, 15 being his employer, this failure has a profound effect 16 on [Post Office Limited] and [Post Office Limited] 17 prosecutions, not least because by reason of Dr Jenkins' 18 failure, material which should have been disclosed to 19 defendants was not disclosed, thereby placing [Post 20 Office Limited] in breach of their duty as 21 a prosecutor." 22 Next: 23 "By reason of that failure to disclose, there are 24 a number of now convicted defendants to whom the 25 existence of bugs should have been disclosed but was 116 1 not. Those defendants remain entitled to have 2 disclosure of that material notwithstanding their now 3 convicted status." 4 He then turns in brackets to the review. 5 Next: 6 "Further, there are also a number of current cases 7 where there has been no disclosure where there ought to 8 have been. Here we must disclose the existence of the 9 bugs to those defendants where the test for disclosure 10 is met." 11 Lastly: 12 "In an appropriate case the Court of Appeal will 13 consider whether or not any conviction is unsafe. In 14 doing so they may well inquire into the reasons for 15 Dr Jenkins' failure to refer to the existence of bugs in 16 his expert witness statement and evidence." 17 End of quotes. 18 That advice was given to the Post Office in 19 July 2013, eight years before the Hamilton appeals. It 20 was not disclosed until November 2020. The Inquiry will 21 seek to establish why the issues raised in the advice 22 and the advice itself, which was so important to the 23 Court of Appeal's subsequent findings, were not 24 disclosed earlier by the Post Office. 25 Meetings had been taking place between the Post 117 1 Office and Cartwright King in July of that year, 2013, 2 to consider issues relating to Horizon and the 3 prosecution of offences. Mr Clarke had advised that 4 there ought to be a single central hub to act as the 5 primary repository for all Horizon-related issues. 6 Participants were apparently informed that they should 7 bring all Horizon-related issues that they had 8 encountered into that meeting. Minutes were to be taken 9 at the meeting. They were to be centrally retained and 10 disseminated to those who required the information. 11 At some point between the conclusion of a conference 12 call on 31 July 2013 and a subsequent advice that he 13 wrote, it became unclear to Mr Clarke as to whether and 14 to what extent material was either being retained or 15 centrally disseminated in accordance with those 16 instructions. 17 Information was relayed to Mr Clarke, and we can see 18 that in his subsequent advice. Can we look at 19 POL00006799. This is a separate advice called the duty 20 to record and retain material, sometimes referred to as 21 the shredding advice. 22 Can we turn over the page, please, and look at 23 paragraph 5. He refers to the conference call to which 24 I've referred, and says: 25 "At some point following the conclusion of the third 118 1 conference call, which I understand to have taken place 2 on the morning of Wednesday 31st July, it became unclear 3 as to whether and to what extent material was either 4 being retained centrally or disseminated. The following 5 information has been relayed to me: 6 "i. The minutes of a previous conference call had 7 been typed and emailed to a number of persons. An 8 instruction was then given that those emails and minutes 9 should be, and have been, destroyed: the word 'shredded' 10 was conveyed to me. 11 "ii. Handwritten minutes were not to be typed and 12 were to be forwarded to POL's Head of Security. 13 "iii. Advice had been given to POL which I report 14 as relayed to me verbatim [then in italics]: 15 "'If it's not minuted it's not in the public domain 16 and therefore not disclosable. 17 "'If it's produced it's available for disclosure -- 18 if not minuted then technically it's not.' 19 "iv. Some at POL do not wish to minute the weekly 20 conference calls." 21 That information was clearly of concern to Mr Clarke 22 and so he wrote the shedding advice. 23 That advice contained trenchant criticisms. He made 24 it clear that there was a duty to record and to retrain 25 material but could not be abrogated. He explained that 119 1 to do so would amount to a breach of the law and, in the 2 case of solicitors and counsel, serious breaches of 3 their respective codes of conduct. Mr Clarke advised 4 that where such a decision was taken, partly or wholly 5 in order to avoid future disclosure obligations, it may 6 well amount to the crime of conspiracy to pervert the 7 course of justice. 8 Further, that if contrary advice was given, his own 9 advice would itself become disclosable. 10 Mr Clarke set out in strong terms that the only 11 proper way forward was for the conference calls to be 12 minuted properly, these minutes to be centrally retained 13 and made available to all those who properly required 14 access to them. 15 Further, he emphasised that individual investigators 16 with knowledge were bound by both a duty to record and 17 to retain information and to inform the prosecutor, the 18 Post Office, about it. He emphasised the need for 19 a mechanism to permit the collation of all Horizon 20 related bugs, defects, complaints, queries and Fujitsu 21 remedies arising from all sources into one location. 22 His conclusion was that any advice to the effect 23 that, if material is not minuted or otherwise written 24 down it doesn't fall to be disclosed, was wrong, and 25 represented a failing fully to appreciate the duties of 120 1 fairness and integrity placed upon a prosecutor's 2 shoulders. 3 The Inquiry will seek to establish what it was that 4 the Post Office had destroyed and look into whether 5 there was a culture of not recording information, of 6 document destruction and of withholding important 7 information from disclosure. It will also, of course, 8 look into who was aware of Mr Clarke's advice, or the 9 effect of it, or any of its contents, and what they did 10 with that knowledge and what subsequent action was taken 11 on the basis of it. 12 That can come down from the screen. 13 Can I return to the Detica report. 14 Meanwhile, Detica, a subsidiary of BAE Systems, had 15 been carrying out an investigation and on 1 October 2013 16 published a report called "Fraud and Non-conformance in 17 the Post Office; challenges and Recommendations". 18 That's POL00029677. 19 This followed a pilot which looked at the data that 20 was available to security teams relating to branch 21 activities and transactions and the quality of 22 information and processes shared by the central teams. 23 It also conducted a detailed data analysis of branch 24 behaviour. The report had been commissioned by the Post 25 Office's head of security, John Scott, and its legal and 121 1 compliance director, Susan Crichton. 2 The Detica report was acknowledged to have taken 3 place against the backdrop of wide-ranging changes 4 within the Post Office, which included public discontent 5 amongst subpostmasters relating to the Horizon System 6 and the review of Horizon by Second Sight. The report 7 identified a number of shortcomings that were said to 8 pose serious risks to the financial performance of the 9 business. 10 This included, amongst other things, findings that 11 "Post Office systems are not fit for purpose in a modern 12 retail and financial environment", expressing a concern 13 about the difficulty in recording information from 14 multiple transaction systems. The cross-reference to 15 that is POL00029677, page 37, at paragraph 7.2.2. 16 It also criticised the investigations process, 17 stating there needed to be "a concept of quality, 18 control and rigour in the investigation process", same 19 reference page 41, paragraph 7.4.1.3. 20 Pausing there, all of the events that I have so far 21 addressed occurred in 2013. As part of Phase 6 of the 22 Inquiry, we will be looking at what was going on at 23 executive level and at board level in that period, and 24 in the period that followed, to address the problems 25 that were being raised and the extent to which there was 122 1 a failure of governance. 2 Can I turn to the Second Sight Report. By the 3 summer of 2014, on 25 July, Second Sight issued what was 4 entitled "Briefing Report -- Part One". That dealt 5 with, first, the general information about the Post 6 Office, its branches and the role of subpostmasters; 7 a description of the training and support functions as 8 well as the Post Office audit and investigation 9 processes; an overview of the Horizon System and 10 associated equipment; an introduction to the application 11 of double entry accounting in Horizon; a description of 12 significant branch operating and reporting procedures 13 and the associated processing of transactions; 14 an outline of the treatment of losses and surpluses; 15 an analysis of typical errors. 16 Second Sight then issued a first version of their 17 "Part Two" report on 21 August 2014, which recognised 18 that a number of issues were still under investigation. 19 The Post Office provided a response to it on 20 22 September 2014. 21 The Inquiry will hear about some important events 22 which occurred shortly before the final report was 23 published. Before I address the substance of the final 24 report, it's necessary to detail some of those events as 25 they provide an important context. 123 1 By December 2014, Radio 4's Today Programme had 2 a segment on Horizon. The programme first heard from 3 Jo Hamilton who explained what had happened to her, and 4 that she would love to see all of the subpostmasters' 5 names cleared and would love to see them have some of 6 their money back. 7 Next came Lord Arbuthnot, who spoke powerfully about 8 the problems that the Mediation Scheme was facing. He 9 said that the Post Office were trying to "sabotage that 10 very mediation scheme that they set up and they're doing 11 it in secret". 12 A significant part of his complaint was that, in his 13 view, Second Sight had shown their independence and Post 14 Office were trying to overcome their recommendations. 15 He said that he had "lost faith in Post Office's 16 determination to see it through to a proper end". 17 In response, Mark Davies, the communications 18 director for the Post Office, emphasised what he said 19 was a small number of people who said they'd had 20 problems with Horizon and -- a phrase which I'll be 21 coming back to -- the review had "found no evidence at 22 all of any systemic problems with the Horizon System". 23 In words that would attract some further notoriety, 24 Mr Davies said that he was sorry if people have "faced 25 lifestyle difficulties, lifestyle problems as a result 124 1 of their having been working in Post Office branches". 2 As part of this Inquiry, the strategies adopted by 3 the Post Office in response to this emerging scandal and 4 who was responsible for the formulation of those 5 strategies and the development of them, will be 6 investigated. 7 The Today Programme interview was followed shortly 8 thereafter by a meeting of the Business Innovation and 9 Skills Select Committee on 3 February 2015. In that 10 committee, Ian Henderson of Second Sight told MPs that 11 the Post Office was obstructing the work of Second 12 Sight. This was denied by the then CEO of the Post 13 Office, Paula Vennells. 14 It was also at this committee meeting that the 15 General Secretary of the National Federation of 16 subpostmasters, George Thompson, said, amongst other 17 things, that the NFSP "represents 7,000 subpostmasters 18 ... if there was a systemic problem ... we would be 19 absolutely inundated" and, a little later "Over the 20 15 years, the Horizon System has been fantastically 21 robust". 22 On 10 March 2015, it was announced that the working 23 group was to be wound up. According to Second Sight, 24 this was the day before they were due to circulate 25 a draft of the report to all members of the working 125 1 group and the same day that Second Sight were notified 2 that their contract was being terminated by the Post 3 Office. 4 Your Inquiry will be looking at what factors led to 5 the failure of the Complaints Review and Mediation 6 Scheme. 7 Returning to the Second Sight Report, an updated 8 version of the "Part Two" report was finally completed 9 on 9 April 2015. That's POL00029849. 10 The "Part Two" report was highly critical of the 11 Post Office's conduct in respect of providing access to 12 information. You'll recall that when I addressed the 13 Interim Report, I highlighted that a document called 14 "Raising Concerns with Horizon" had sought to reassure 15 subpostmasters confirming that Second Sight would have 16 access to all of the documents that it needed. 17 However, the investigators explained at the 18 outset -- that's paragraph 2.1 -- that they had 19 experienced significant difficulty in obtaining access 20 to a number of documents that they considered to be 21 necessary for the purposes of their investigation. They 22 fell into the three categories: first, the complete 23 legal files relating to investigations and criminal 24 prosecutions commenced by Post Office that related to 25 the applicants; second, the complete email records 126 1 relating to a small number of Post Office employees 2 working at the Bracknell office of Fujitsu in 2008; and, 3 third, detailed transactional records relating to the 4 items held in Post Office's suspense accounts and to 5 disputed transactions in a number of third-party client 6 accounts held by Post Office. 7 In respect of the legal files, Second Sight 8 explained that they could not properly test the Post 9 Office's assertion that there was "no reason to conclude 10 that any original prosecution was unsafe". 11 They were told that reviewing individual 12 investigative and prosecution files didn't fall within 13 their terms of reference. 14 We now know, of course, that the assertion that 15 there was no reason to conclude that any original 16 prosecution was unsafe -- something that Second Sight 17 wanted to investigate further -- was fundamentally 18 wrong. 19 In respect of access to the emails, Second Sight 20 explained that the Post Office had stated that it wasn't 21 possible for unauthorised remote access to transaction 22 data to have occurred at the Fujitsu office in Bracknell 23 and that it needed further evidence properly to research 24 this. 25 Again, we now know that Post Office's assertion 127 1 regarding remote access -- again, something that Second 2 Sight wanted to investigate -- was wrong. 3 In respect of transaction data, Second Sight 4 highlighted that the Post Office had client accounts 5 with business partners such as the Royal Mail, Bank of 6 Ireland, HMRC, DWP, DVLA and others, where significant 7 unreconciled balances existed centrally, which may 8 represent transactions from individual branches that 9 should have been credited back to individual branch 10 accounts. They were unable to investigate this without 11 the relevant information being provided to them by the 12 Post Office. 13 Can we turn up Second Sight's conclusions in respect 14 of access to information. They're at POL00029849, and 15 can we turn to page 49 of that document, please. 16 Over the page, please, and go down to the bottom 17 under "Conclusions", at paragraph 26.1. Their 18 conclusions, 26.1: 19 "When we started our work on these important matters 20 in July 2012, we believed there was a shared commitment 21 with Post Office to 'seek the truth' irrespective of the 22 consequences. This was reflected in us being provided 23 with unrestricted access to highly confidential and 24 sensitive documents, including legal advice relating to 25 individual cases. This position was recognised and well 128 1 received by other stakeholders, including the [Right 2 Honourable] James Arbuthnot MP and the JFSA. 3 "26.2. However, as time progressed, and 4 particularly in the last 18 months, it has been 5 increasingly difficult to progress our investigations 6 due to various legal challenges by Post Office. There 7 have been considerable delays in receiving responses to 8 requests for information and legal issues have been 9 raised, such as Data Protection and Legal Privilege, as 10 being the reason various documents could no longer be 11 provided to us." 12 Over the page, please: 13 "26.3. We found that types of document previously 14 provided to us without restriction, were no longer being 15 provided. Some of these documents were also not being 16 provided to Post Office's in-house team of 17 investigators. 18 "We can only conclude that this represented a policy 19 decision by Post Office at a senior level, possibly 20 based on legal advice. We consider this regrettable, 21 particularly in the light of assurances previously 22 provided to ourselves, MPs and the JFSA." 23 In the light of those damning remarks, the "Part 24 Two" report stated that the limitation in the scope had 25 significantly restricted Second Sight's ability to 129 1 complete its investigation. 2 There were other significant disputes between the 3 Post Office and Second Sight, as to the remit of their 4 investigation, including, first, Second Sight's concerns 5 regarding the contract between the Post Office and 6 subpostmasters, which they considered placed 7 subpostmasters in a difficult position, forcing them to 8 make good losses with inadequate information. 9 Secondly, the transfer of risk between Post Office 10 and subpostmasters, with changes to business processes, 11 such as the introduction of new products and services, 12 adding to the risks. 13 Thirdly, a lack of improvement in what was called 14 the "error repellency" of Post Office's business 15 systems, which meant that measures to address errors 16 with Horizon, which could have avoided and mitigated 17 problems, were not being introduced. 18 Despite acknowledging the limitations of its 19 investigations, which resulted from this difference of 20 opinion as to remit and scope, Second Sight nevertheless 21 identified a number of what they called commonly raised 22 issues. These included commonly raised issues, for 23 example, with ATMs, foreign currency transactions and 24 National Lottery syncing. 25 Second Sight also identified issues with training 130 1 subpostmasters, in respect of how to deal with 2 discrepancies. They identified issues with the 3 helpline, noting that a frequently recurring response by 4 the helpline was, in response to shortfalls, "don't 5 worry about it, it will all sort itself out" and found 6 that, in many instances, the bigger shortages seemed to 7 have arisen as a result of "errors made while trying to 8 correct earlier errors". 9 The report was critical of the audit trail available 10 to subpostmasters, the conduct of Post Office 11 investigators and the conduct of prosecutions. 12 It is perhaps not a coincidence that many of these 13 themes were also repeated in evidence that you heard 14 during the human impact hearings, when you heard from 15 subpostmasters who made very similar complaints. As 16 your Inquiry proceeds to these later phases, you will 17 have to consider whether these issues were taken 18 seriously by the Post Office at the time. 19 One significant issue that was raised by Second 20 Sight, that I have already touched on, was that 21 applicants reported that Horizon transactions appeared 22 to have been entered or stock balances changed, when the 23 branch was closed, and no one had access to any of the 24 Horizon terminals. Second Sight noted that the Post 25 Office had stated that it had not been and never had 131 1 been possible for anyone to access branch data and to 2 amend live transactional, cash or stock data, without 3 the knowledge of subpostmasters or their staff. 4 As I have mentioned, one applicant had given 5 evidence relating to a facility at the Bracknell office 6 of Fujitsu, where he alleged that it was demonstrated to 7 him that it was possible to alter Horizon transaction 8 details without the knowledge of subpostmasters. The 9 Post Office was said to have denied that it is possible 10 to "amend branch data remotely". Second Sight 11 identified several apparent inconsistencies in this 12 account but noted the restrictions in their ability to 13 investigate it further. 14 They concluded that their "current, evidence based 15 opinion, is that Fujitsu/Post Office did have, and may 16 still have, the ability to directly alter branch records 17 without the knowledge of the relevant subpostmaster". 18 That's the same reference at page 6. So it is that in 19 previous 2015, where Second Sight identified remote 20 access as a significant issue. 21 I have already referred to evidence that in 2010, 22 certain Post Office employees were aware that Fujitsu 23 had remote access. We know from contemporaneous emails 24 that there was a great deal of discussion about this at 25 a senior level in the Post Office in early 2015. 132 1 Cross-reference to that is POL00024091. 2 However, remote access was a matter that appears to 3 have been denied by the Post Office, right up until 4 partway through the Group Litigation. The Inquiry will 5 ask how it was that it took so long to admit it. 6 A section of the report addressing "error and fraud 7 repellency and Horizon's fitness for purpose" was also 8 highly critical of the Post Office. The author said 9 that in not fully investigating errors made at the 10 counter, even where it was obvious that some of those 11 errors have been systematically repeated in a branch or 12 even across a network, the Post Office "seems not to 13 have taken ownership of finding ways to reduce or manage 14 those errors". 15 On fitness for purpose, Second Sight's report 16 identifies two different approaches. I wonder whether 17 we could draw up the conclusions at the previous 18 reference, POL00029849, this time at page 43 and it's 19 paragraph 21.21 -- so you need to go down a little bit, 20 thank you. 21 "Is Horizon fit for purpose? 22 "In trying to answer this question we recognise 23 that, in the vast majority of cases, Post Office's 24 Subpostmasters operate their branches year after year 25 with minimal reported problems. For them, [Horizon] 133 1 appears (subject to our observation in paragraph 4.6 2 above) to be 'fit for purpose'. 3 "References here to 'the Horizon System' are mainly 4 focused on 'Horizon On Line' which evolved from the 5 original Horizon application and was deployed in 2010. 6 Our comments encompass not only the system itself but 7 also supporting provides and procedures. However, some 8 comments received relate to earlier versions of the 9 system, a number of enhancements having been made 10 following user experience and feedback. 11 "For the system to be considered fully 'fit for 12 purpose' for all users, it would, in our opinion, need 13 to accurately record and process, with a high degree of 14 error repellency, the full range of products and 15 services offered by the Post Office, whilst providing 16 a clear transactional audit trail allowing easy 17 investigation of any problems and errors that arise. 18 The cases that we have reviewed demonstrate that this 19 design objective has not always been achieved." 20 If we can go forward to paragraph 21.27, please, 21 thank you. 22 "Where such a person, who was either unsuitable, 23 inexperienced or inadequately trained [they're talking 24 about some subpostmasters there], was faced with 25 problems, perhaps associated with hardware or 134 1 telecommunications failures and the system's resultant 2 restart and recover procedures, it was at that moment 3 that an otherwise repairable situation had often turned 4 into a catastrophe. For them, and in those specific and 5 limited circumstances, Horizon could not be described as 6 'fit for purpose'." 7 As to whether there were systemic issues, Second 8 Sight said "when looking at the totality of the 'Horizon 9 experience' we remain concerned that, in some 10 circumstances, Horizon can be systemically flawed from 11 a user's perspective and Post Office has not necessarily 12 provided an appropriate level of support." 13 Whether or not the Second Sight Report can be 14 described as finding systemic issues is a matter of 15 significant debate. I have already highlighted the 16 comments of the Post Office and the NFSP to the media 17 and to Parliament, prior to the publication of the 18 Second Sight Report. On 29 June 2015, the Parliamentary 19 Under-Secretary of State for Business, Innovation and 20 Skills, George Freeman, said during a Parliamentary 21 debate: 22 "Second Sight produced two independent reports -- 23 one in 2013 and the other earlier this year -- both of 24 which found that there was no evidence of systemic flaws 25 in the system. That is an important point that I would 135 1 like to reiterate in response to the shadow Minister's 2 point: there is no evidence of systemic flaws in the 3 system." 4 That's POL00030475 at page 6. 5 The role of Government and, in particular, what is 6 now the Department for Business, Energy and Industrial 7 Strategy, in responding to the emerging scandal, will 8 therefore form a significant part of your Inquiry. Your 9 Inquiry will also look into the breakdown in cooperation 10 between the Post Office, Second Sight and others, it 11 will investigate the levels of knowledge of such issues, 12 such as remote access and systemic problems and will 13 identify any failures in this regard. 14 After the break, sir, could I turn to the role of 15 external lawyers and legal advice, again broadly 16 chronologically, starting with advice from Mr Altman, 17 King's Counsel, in 2013 and 2014. 18 SIR WYN WILLIAMS: Of course. What time shall we be 19 starting up again? 20 MR BEER: Using earlier as a precedent, sir, 3.15. 21 SIR WYN WILLIAMS: All right, fine. 22 (2.59 pm) 23 (A short break) 24 (3.15 pm) 25 MR BEER: Thank you very much, sir. 136 1 I was turning to advice from Brian Altman King's 2 Counsel, in 2013 and 2014. Mr Altman had advised the 3 Post Office over a considerable period of time, 4 including representing the Post Office in the Court of 5 Appeal in criminal appeals. He was formerly the most 6 senior prosecution barrister in England, known as the 7 First Senior Treasury Counsel. For the purposes of 8 opening, I will begin on 2 August 2013, that's after the 9 Helen Rose Report, the Interim Report of Second Sight 10 and the Clarke Advice. 11 On 2 August 2013, Mr Altman provided advice on 12 Cartwright King's current processes in a document 13 entitled "Interim Review of Cartwright King's current 14 processes". No need to display it but it's POL00006801. 15 He advised that the approach that was being taken by 16 Cartwright King and counsel appeared to be 17 "fundamentally sound", but suggested that the Post 18 Office may wish to consider the geographical limit of 19 the review, which was limited to Cartwright King cases, 20 and English Cartwright King cases, and the temporal 21 limit that had been applied. This had been limited to 22 a period of only three years. 23 He also advised that they should consider the extent 24 to which non-disclosure by Gareth Jenkins was the only 25 issue potentially forming any grounds of appeal or 137 1 whether the review should be broader. 2 Mr Altman raised the issue of a possible conflict 3 with Cartwright King, essentially marking their own 4 homework. But Mr Altman's advice in this respect, was 5 "there is benefit in Cartwright King and its internal 6 counsel identifying and engaging in the review of 7 impacted cases, as they are familiar with their case 8 files and intimate with the process". 9 He went on to say: 10 "But it seems to me it will be wise for me to dip 11 sample some of their work in due course, and I may have 12 to devise some criteria of my own for those cases I feel 13 I should review personally." 14 He gave some other practical advice to Cartwright 15 King in respect of the review that they were conducting. 16 It may become relevant that, as part of the advice, 17 that Mr Altman considered two copy prosecution files, 18 something that does not appear later to have been 19 reflected in a submission to the Court of Appeal in 20 Hamilton, namely that this advice considered a review of 21 the process, though not the individual decisions in 22 reviewed cases. 23 Now, Mr Altman's advice during this period was not 24 confined to matters relating to the criminal appeals and 25 instead it touched on other matters, including the 138 1 mediation. I wonder whether we could look at 2 POL00006769. This is a note of a consultation with 3 Mr Altman on the 9 September 2013, and I just want to 4 look at one part of it, it's on page 3 of the document. 5 It's the fourth paragraph from the top, starting "BA 6 advised", "BA" meaning Mr Altman. 7 So the fourth paragraph in: 8 "[Mr Altman] advised considerable caution in 9 relation to mediation cases involving previously 10 convicted individuals (Seema Misra has already indicated 11 an intention to be within the scheme). The concern is 12 that lawyers acting for those individuals may be using 13 the scheme to obtain information which they would not 14 normally be entitled to in order to pursue an appeal." 15 The Inquiry will be looking at how the advice that 16 was being given in relation to the approach to mediation 17 and the subsequent Group Litigation, influenced or was 18 influenced by advice that was given in relation to the 19 criminal appeals. We know that Seema Misra's appeal was 20 quashed on the grounds that her prosecution was both 21 unfair and an affront to justice. But that didn't occur 22 until 23 April 2021, some eight years later. 23 The Court of Appeal identified significant failings 24 in her prosecution, including a failure to grant 25 a defence request for Horizon data and wrongly placing 139 1 of an article relating to the integrity of the system in 2 a schedule of sensitive material. A question that will 3 be asked is that: should she and others in a similar 4 position have been provided with more information and 5 earlier? If so, why wasn't she? What role did legal 6 advice of this kind provide about exercising 7 considerable caution in relation to mediation cases? 8 On 15 October 2013, Mr Altman provided his "General 9 Review". That's POL00006803. He again advised that the 10 Cartwright King review was fundamentally sound and that 11 he had not detected any systemic or fundamental flaws in 12 the review process or the evidence arising from it, 13 albeit that that should be kept under review. One 14 important aspect of this advice concerned the role of 15 Gareth Jenkins, with Mr Altman agreeing that Mr Jenkins 16 was "tainted and his position as an expert witness is 17 untenable". 18 We know from the Horizon Issues judgment that Gareth 19 Jenkins contributed to the evidence that was relied on 20 in the Group Litigation, albeit the Post Office chose 21 not to call him as a witness and thereby subject him to 22 cross-examination. 23 The Inquiry will ask whether it was appropriate in 24 the light of the advice received from both Mr Clarke and 25 Mr Altman, to behave in this way, to approach the 140 1 litigation in this way. 2 By late 2013 Mr Altman was also advising the Post 3 Office on their investigative or prosecutorial roles. 4 On 19 December he provided written advice entitled 5 "Review of Post Office Limited Prosecution Role", that's 6 POL00006802. An earlier draft of this advice had been 7 circulated by him and commented on. 8 In the advice, Mr Altman concluded that he had seen 9 no evidence to suggest that Post Office exercised its 10 investigations and prosecution functions in anything 11 other than a well organised, structured and efficient 12 manner, through an expert and dedicated team of in-house 13 investigators and lawyers supported by Cartwright King 14 Solicitors and their in-house counsel, as well as 15 external counsel and agents when required. 16 He concluded that there was no good reason to 17 recommend that the Post Office should discontinue its 18 prosecution role. He did, however, make some 19 recommendations for improvements. 20 This advice contained, at the end of it -- and we'll 21 see this when we come to examine it -- a brief CV of its 22 author, Mr Altman, by way of footnote, and recorded that 23 he had been First Treasury Counsel and was, amongst 24 other things, a recorder of the Crown Court and 25 a Bencher of Middle Temple. 141 1 The Inquiry will consider what role advice of this 2 kind, presented in this way, had in the Post Office's 3 subsequent conduct and whether advice of this kind 4 provided the Post Office and its leadership with 5 a comfort blanket. 6 Moving to 2015, on 8 March 2015, Mr Altman gave 7 important advice to the Post Office, concerning the 8 charging of theft and false accounting. That's 9 POL00006588. 10 This was during the course of the investigation by 11 Second Sight, just before their contract was terminated 12 or ended, and the premise of the advice was that Second 13 Sight were "beginning to advance arguments that [the 14 Post Office] is abusing its prosecutorial role by 15 charging subpostmasters with theft, when there is no 16 evidence of it, in order only to pressure subpostmasters 17 into pleading guilty to false accounting". 18 Cartwright King had advised that that suggestion, 19 the suggestion that the offence of false accounting was 20 a less serious to that of theft, was incorrect because 21 they were both offences of dishonesty and both carried 22 the same maximum sentence. 23 That position was communicated to Second Sight -- 24 see POL00040868 -- as follows: 25 "The suggestion that the offence of false accounting 142 1 is a less serious offence to that of theft is incorrect. 2 Both offences are equal in law: both are offences of 3 dishonesty and both carry the same maximum sentence ..." 4 The advice noted that Sir Anthony Hooper, meanwhile, 5 had said that false accounting was a lesser charge than 6 theft and that Second Sight were not incorrect to 7 characterise it as such. The advice from Mr Altman was 8 sought to ensure that the statement made to Second Sight 9 to the contrary by the Post Office was "defensible". 10 Mr Altman's view is set out at POL00006588 at 11 page 5. He says: 12 "If I may say so, the so-called 'equality' of the 13 offences is an unnecessary and unprofitable focal point 14 of attention. The other issues raised by the letter 15 have greater force and are defensible." 16 His conclusions at page 7 were as follows: 17 First, both offences of theft and false accounting 18 do involve dishonesty and do carry a maximum sentence of 19 7 years' imprisonment. 20 The only argument that may be advanced to defend the 21 statement is that it is accurate 'within the narrow 22 context within which it was stated'. 23 Third, the point was that false accounting may be 24 a lesser offence, and may often be a lesser offence in 25 the context in which it is charged, so to argue that it 143 1 is not a lesser offence is not accurate; it all depends 2 on the circumstances of the individual case. 3 Fourth, the statement was undermined by the fact 4 that the seriousness or otherwise of any offence of 5 theft or false accounting must always depend on its own 6 facts, as is demonstrated by the many ways in which such 7 offences may be committed, and how offenders may be 8 sentenced for them. 9 What does not appear is a blunt and unequivocal 10 statement to the effect that, where both theft and false 11 accounting are charged for the same conduct, the charges 12 of false accounting may be seen as less serious, which 13 appears to be exactly the point that Second Sight and 14 Sir Anthony Hooper were both identifying. Also not 15 addressed is whether, in practice, an innocent person 16 may be more likely to plead to what may be perceived as 17 a less serious charge and whether barristers and 18 solicitors are likely to advise their clients that false 19 accounting is, in practice, less likely to result in 20 a prison sentence. 21 Another significant strand of legal advice was 22 provided in the form of a review conducted on behalf of 23 the then chairman of the Post Office by this time, Tim 24 Parker, on 8 February 2016. The reference is 25 POL00006355. 144 1 It was carried out by Jonathan Swift (then Queen's 2 Counsel, now a High Court judge, and former First 3 Treasury Counsel) together with a junior, Christopher 4 Knight. I'm going to call this document the "Swift 5 Review". 6 The purpose of the Swift Review was said to be to 7 consider whether any further action could reasonably be 8 taken by the Post Office to address the complaints by 9 subpostmasters about their treatment. The review 10 concentrated on four areas: first, criminal 11 prosecutions; second, the Horizon System; third, the 12 support provided to subpostmasters through training and 13 helplines; fourth, the investigations into the 14 circumstances of specific complaints, where a complaint 15 had been made. 16 First, criminal prosecutions. 17 In respect of the safety of convictions and the 18 disclosure of information, the Swift Review noted that 19 none of the Second Sight Report identified systemic 20 flaws in the Horizon System, likely to have caused the 21 losses incurred at the relevant branches. Rather, it 22 was said that operator errors at the counter was the 23 usual cause identified by Second Sight, with the 24 likelihood of those errors being exacerbated by problems 25 in training and support. 145 1 From this, the authors of the swift report 2 understood: 3 "There is no evidence that the Horizon System ... is 4 responsible for the losses which have resulted in 5 convictions." 6 That's paragraph 95. 7 The Swift Review observed that a considerable 8 exercise had been undertaken by Cartwright King in 2013 9 that was the subject of advice and oversight by 10 Mr Altman. Mr Altman had considered both the process 11 adopted by Cartwright King and their actual decisions in 12 a sample of cases, to be reasonable and proportionate. 13 The Swift Review also reviewed a small sample of reviews 14 that had been conducted by Cartwright King. 15 The conclusion of the Swift Review in this respect, 16 same reference, page 33, is: 17 "We are accordingly content that POL has acted 18 reasonably in its handling of disclosure issues, arising 19 in relation to past criminal prosecutions." 20 Following this conclusion, the Swift Review stated 21 that it would be inappropriate for the Post Office to 22 conduct a wider review of the safety of any particular 23 conviction when that work was being carried out by the 24 CCRC. 25 That conclusion, that the Post Office had acted 146 1 reasonably in its handling of disclosure issues, is 2 a conclusion of some significance. We will investigate 3 the basis of the conclusion. Was the Swift Review given 4 sufficient disclosure by the Post Office, for example, 5 in this regard? Was there information that this Swift 6 Review was not provided with which might have altered 7 the conclusion? Was too much reliance placed on the 8 previous advice of Mr Altman and the Second Sight 9 review? 10 In respect of the sufficiency of evidence, the Swift 11 Review noted the allegation that the Post Office had too 12 readily brought a charge of theft, with the aim or 13 effect that a subpostmaster is pressurised into pleading 14 guilty to false accounting, in the hope that the theft 15 charge is dropped and because a theft charge would more 16 readily enable the Post Office to recover its losses. 17 They noted one case, in which there was a guilty 18 plea to false accounting in return for which a theft 19 charge was not pursued, where certain documents in the 20 prosecution file indicated that initial Post Office 21 investigators could not find any evidence of theft, 22 despite it being charged. 23 In this regard, the Swift Review relied on 24 Mr Altman's advice of 8 March 2015, that I have already 25 mentioned, where he has said that it was not a helpful 147 1 question as to whether theft and false accounting were 2 offences of equal seriousness. It also noted, for 3 example, that the decision to plead guilty was a matter 4 for the defendant alone, that the Post Office's position 5 was that its prosecutorial decisions were always taken 6 in accordance with the Code for Crown Prosecutors and 7 that Cartwright King must have considered the evidence. 8 The Swift Review noted the Post Office's position 9 that, because of these points and because of any review 10 would be carried out with the benefit of hindsight, it 11 would not be an appropriate course of action now to 12 review prosecution files, to reconsider the sufficiency 13 of evidence issue. 14 The authors of the Swift Review strongly disagreed. 15 They stated, page 35, same reference: 16 "We do not agree. We have reached the view that 17 this issue is one of real importance to the reputation 18 of POL, and is something which can feasibly and 19 reasonably be addressed now. It is clear that it is not 20 an exercise which has been carried out so far, and 21 Cartwright King were not asked to consider the 22 sufficiency of evidence when undertaking their 23 disclosure review. We do not think it is safe to infer 24 that any advice Cartwright King gave on POL's position 25 on any appeal must have involved a full evidential 148 1 review. The allegation that POL has effectively bullied 2 [subpostmasters] into pleading guilty to offences by 3 unjustifiably overloading the charge sheet is a stain on 4 the character of the business. Moreover, it is not 5 impossible that [a subpostmaster] will have felt 6 pressurised into pleading guilty to false accounting 7 believing it to be less serious when they might not 8 otherwise have done so; the phenomenon of false 9 confessions is well known." 10 Your Inquiry will investigate how widely this part 11 of the advice, in which strong advice was given, was 12 shared and, if not, why not? It has been reported that 13 the advice was not shown to the board of the Post 14 Office, despite such trenchant criticism being made in 15 the passage that I've just cited. We'll investigate 16 those reports of how widely the advice was shared are 17 correct and, if they are correct, why the advice was not 18 shown to the board. 19 The Swift Review then looked at the criticism that 20 had been levelled at the Post Office concerning its 21 ability to conduct private prosecutions in the absence 22 of specialist criminal expertise that the police has or 23 the independent view that's supplied by the CPS. 24 This was dealt with briefly in the advice, which 25 noted that Mr Altman had provided advice in this regard 149 1 on 31 October 2013 and that a revised prosecution policy 2 was awaiting approval. 3 The review made two recommendations in respect of 4 criminal prosecutions. Firstly, that advice be sought 5 from counsel as to whether the decision to charge 6 a subpostmaster with theft and false accounting could 7 undermine the safety of any conviction for false 8 accounting, where the conviction was on the basis of 9 a guilty plea, following which, and/or in return for 10 which the charge of theft was dropped, and where there 11 had not been a sufficient evidential basis to bring the 12 theft charge. 13 Secondly, if such a conviction could be undermined 14 in those circumstances, that counsel review the 15 prosecution file in such cases to establish whether 16 applying the facts and law applicable at the relevant 17 time, there was sufficient evidential basis to conclude 18 that a conviction for theft was a realistic prospect, 19 such that the charge was properly brought. 20 The Swift Review accepted, when it considered the 21 Horizon System on the basis of what the authors had 22 seemingly been told, that the Horizon System works 23 "effectively and accurately for the overwhelming 24 majority of the time and, for the overwhelming majority 25 of its users, is accurate", that's paragraph 119, and 150 1 saw no basis to recommend further action be taken on the 2 bugs that had been identified. 3 However, the Review raised concerns that the 4 analysis that had so far taken place was "bottom up", in 5 the sense that it started from and focused on the 6 specific circumstances of the branch, rather than the 7 top-down approach of searching for patterns of unusual 8 behaviour in individual branches and across branches on 9 a purely data-driven analytical basis, which might 10 suggest a wider problem. 11 The review then looked at the consistent assurances 12 from the Post Office and Fujitsu that transaction 13 records and therefore branch balances could not be 14 remotely altered without the knowledge of 15 a subpostmaster. 16 The Swift Review considered a range of evidence, 17 including the Second Sight Reports and the reports 18 produced by Deloitte in May and June 2014, and it 19 concluded as follows, this is POL00006355, at page 51: 20 "It seems to us that the Deloitte documents in 21 particular pose real issues for POL. First, both the 22 existence of the Balancing Transaction capability and 23 the wider ability of Fujitsu to 'fake' digital 24 signatures are contrary to the public assurances 25 provided by Fujitsu and POL about the functionality of 151 1 the Horizon System ... in the light of the consistent 2 impression given that they do not exist at all, we 3 consider that it is now incumbent upon POL to commission 4 work to confirm the position insofar as possible ... 5 Second, the Deloitte reports, or at least the 6 information contained within them, may be disclosable 7 under POL's ongoing duties as a criminal prosecutor." 8 As I have already observed, remote access was 9 a matter that appears to have been denied by the Post 10 Office until 2019, until part way through the Group 11 Litigation, yet it was raised as a significant issue 12 once again in this review, in February 2016. The 13 chairman, Tim Parker, on behalf of whose review this 14 took place, chaired the Post Office throughout the Group 15 Litigation. The Inquiry will investigate what, if any, 16 action was taken by him at this time. 17 In the light of these findings, the Swift Review 18 recommended, first, that the Post Office consider 19 instructing a suitably qualified party to carry out 20 an analysis of the relevant transaction logs for 21 branches within the scheme to confirm, insofar as is 22 possible, whether any bugs in the Horizon System are 23 revealed by the dataset which caused discrepancies in 24 the accounting position of any of those branches. 25 That the Post Office, secondly, consider instructing 152 1 a suitably qualified party to carry out a full review of 2 the use of balancing transactions throughout the 3 lifetime of the Horizon System, insofar as possible, 4 independently to confirm from the Horizon System records 5 the number and circumstances of their use. 6 Third, that the Post Office instruct a suitably 7 qualified party to carry out a full review of the 8 controls over and use of the capability of authorised 9 Fujitsu personnel to create, amend or delete baskets 10 within the sealed audit store throughout the lifetime of 11 the Horizon System, insofar as possible. 12 Fourth, that the Post Office sought specialist legal 13 advice from external counsel as to whether the Deloitte 14 reports or the information with them, concerning 15 balancing transactions and Fujitsu's ability to delete 16 and amend data, should be disclosed to the defendants of 17 criminal prosecutions brought by Post Office. This 18 advice should also address whether disclosure should be 19 made, if it hadn't been made, to the CCRC. 20 The Inquiry will seek to establish what action was 21 taken as a result of that advice. 22 In terms of the support provided to subpostmasters, 23 the Swift Review noted that complaints had been made 24 regarding the training that subpostmasters had received, 25 and allegations that the support provided through the 153 1 NBSC was unhelpful and misleading. This was not 2 a significant part of the review, it seems, because the 3 authors acknowledged several limitations in the ability 4 definitively to deal with each individual allegation. 5 However, during the course of the investigation it had 6 emerged that calls to the NBSC were recorded against the 7 identity of the call handler and it was, therefore, 8 possible for the Post Office to cross-reference 9 complaints against the personnel files of call handlers. 10 They recommended as follows: first, that POL 11 cross-reference specific complaints about misleading 12 advice from NBSC call handlers with the possible 13 employees who provided that advice and consider their 14 personnel files, where available, for evidence as to the 15 likelihood that the complaint may be well founded. 16 The authors did not make recommendations with regard 17 to training and support on the basis that, rather than 18 looking at past cases, this was an area that the great 19 attachments of work could be done to improve the 20 situation in future and that the Post Office had already 21 accepted the need to do that work across all areas of 22 the business and in detail. 23 In the final section of the Swift Review, concerning 24 the independent Mediation Scheme, that part of the 25 review proceeded on the basis that the Post Office was 154 1 entitled to treat only those who had applied to the 2 scheme as raising serious or material complaints about 3 Horizon and the Post Office's treatment of them. 4 The review considered the processes involved in the 5 scheme and considered in detail a 10 per cent sample 6 from those cases where there had not been a conviction. 7 That limited sample was only 11 cases in total. The 8 Swift Review was seemingly impressed by the work that 9 had been carried out by the Post Office. In some 10 respects, the Review was critical of the lack of 11 assistance by subpostmasters in highlighting potential 12 causes or time periods, or errors in the information 13 that they had given. The review stated that it was 14 extremely difficult for any third-party or the 15 subpostmaster, with the passage of time, to review the 16 records to identify precisely what went wrong. 17 They expressed surprise at how many of these cases 18 involved -- to use the words of the authors -- blatant 19 instances of false accounting rendering POL's task of 20 assisting the subpostmaster in working out where 21 problems had arisen very much harder, without an 22 accurate reference point from which to work. 23 The Swift Review made only one recommendation in 24 respect of the scheme. This concerned an issue which 25 had been raised by Second Sight in relation to the 155 1 handling by the Post Office of unmatched credit balances 2 in its own suspense account, in respect of third party 3 clients, such as Santander or Bank of Ireland. 4 Second Sight had identified that, where there were 5 significant sums in unmatched balances, it was possible 6 that at least some of the money would reflect 7 uncorrected transaction discrepancies, in particular 8 branches. 9 The Swift Review found this was worthy of 10 investigation and recommended that POL Commission 11 forensic accountants to review the unmatched balances on 12 POL's general suspense account to explain the 13 relationship or lack thereof with branch discrepancies 14 and the extent to which those balances can be attributed 15 to and repaid to specific branches. 16 The Inquiry will be considering what information was 17 provided to the Swift Review and, in particular, whether 18 the authors were aware of all of the information which 19 raised reliability issues, which I have mentioned over 20 the course of the past day and a half. 21 If they were not provided with this information, was 22 that intentional and who made the decision not to 23 provide them with it? Why did the authors meet, amongst 24 others, Gareth Jenkins, and what did they know of the 25 concerns that had been raised concerning his 156 1 credibility? 2 Importantly, the Swift Review was identified by Paul 3 Scully, the relevant minister in 2020, as having 4 concluded that "there were no systemic problems with the 5 Horizon System". 6 The Inquiry will look into the extent to which that 7 often repeated phrase was actually an accurate 8 reflection of the Swift Review. You will hear about who 9 saw the full report and when and, where it wasn't 10 shared, why it wasn't shared. 11 Further advice from Mr Altman. 12 He was asked to advise the Post Office following the 13 Swift Review, and this advice was dated 26 July 2016, 14 entitled "Review of Post Office Limited Criminal 15 Prosecutions". It's to be found at POL00006394. He 16 reviewed eight individual cases that were apparently 17 selected because they were high profile cases within the 18 Group Litigation or CCRC cases. 19 Mr Altman concluded that those cases that fell 20 squarely within the remit of his review were conducted 21 in such a way that the allegation that Post Office had 22 operated a deliberate policy to charge theft, when there 23 was no or no sufficient evidence to support it, just to 24 encourage or influence pleas of guilty to charges of 25 false accounting is "fundamentally misplaced". 157 1 He stated: 2 "Not only is there no evidence of such a policy, 3 there is positive evidence that such that each case was 4 approached both by internal and external lawyers 5 professionally and with propriety and, unquestionably, 6 case specifically." 7 He went on: 8 "Not only have I found absolutely no evidence of the 9 existence of any such policy, I have also not discovered 10 any evidence in the cases that I have been invited to 11 review that theft (or fraud for that matter) was charged 12 without any proper basis to do so and/or in order only 13 to encourage or influence guilty pleas to offences of 14 false accounting." 15 Mr Altman also touched on the issue of whether it 16 was inappropriate to use the criminal justice system as 17 a means of enforcing repayment from offenders by 18 charging and pursuing offences that will result in 19 confiscation and compensation orders. His view was 20 that, based on the Code for Crown Prosecutors, it was 21 appropriate to consider, amongst other things, when 22 selecting charges, the court's sentencing powers and the 23 imposition of appropriate post-conviction orders and 24 that, in the cases he reviewed, these considerations 25 were properly made. 158 1 The Inquiry will investigate how this advice fits 2 with public comments that have been made by Sir Anthony 3 Hooper, who was directly involved in the mediation 4 process. He had expressed views most recently that he 5 pointed out to the senior management of the Post Office 6 that there was unlikely to be theft in the cases that he 7 had seen because of number of factors, including, first, 8 the previous good character of the postmasters 9 concerned; secondly, the shortsighted nature of any 10 theft, given that the subpostmasters would be liable to 11 make up any shortfalls; and, thirdly, that there was 12 nothing to suggest that they were stealing and no actual 13 evidence of financial loss. For him, the more likely 14 cause was that it was down to Horizon. 15 You will investigate how that advice to the Post 16 Office sits with other advice that was obtained, which 17 was supportive of the Post Office's approach to theft 18 charges. 19 Mr Altman also provided an advice called "Advice on 20 settlement", which addressed the risk to the safety of 21 convictions if Post Office entered into settlement with 22 any of the claimants in the Group Litigation. The 23 advice, dated 17 July 2019 -- there's no need to turn it 24 up, it's at POL00006401 -- was as follows: 25 1. Any admission of wrongdoing by the Post Office 159 1 to convicted Claimants was to be avoided "as is any 2 public apology that risks misinterpretation or the 3 implication of an admission of fault". 4 2. There was "a real risk of Post Office taking 5 an approach which could be interpreted as incongruous 6 with the processes it instituted as a prosecutor". 7 3. Settlement would invite critical scrutiny not 8 only of Post Office's prosecution function but also of 9 its prosecutorial decision making function during the 10 pre-trial and trial processes. 11 "4. Settling or seeking to settle "may be viewed as 12 a sign of weakness, a lack of confidence in both its 13 civil and criminal cases by the convicted claimants, as 14 well as the CCRC, who may then be encouraged to 15 investigate 'the technical aspects' of the case heard 16 the Horizon Issues Trial evidence and seek to appeal or 17 to make a reference, which will potentially open the 18 settlement agreement (or the rationale underlying it) to 19 consideration or questioning by the Court of Appeal as 20 part of any appeal/reference hearing." 21 5. There was, in Mr Altman's judgment, "some risk 22 to the safety of convictions of including convicted 23 claimants in any settlement agreement or package". 24 As I noted in respect of the earlier advice, the 25 Inquiry will look at the role that advice of this kind 160 1 from senior lawyers had on the strategy that was adopted 2 by the Post Office towards mediation and settlement. 3 "Is it right to delay or avoid settlement because of 4 the impact that it might have on a criminal appeal?" is 5 the question that might need to be addressed. 6 Further advice was provided by Mr Altman on the 7 Common Issues Judgment and the Horizon Issues Judgment. 8 In the latter advice, Mr Altman advised on the impact of 9 Mr Justice Fraser's judgment on criminal convictions and 10 resultant disclosure obligations. His advice was that 11 appellants in the CCRC would have a high hurdle to 12 overcome in respect of non-disclosure because they would 13 have to show that it was material. At the end of his 14 advice, Mr Altman noted that the apparent late 15 concession in the litigation to entries having been 16 "entered/edited/deleted negligently or dishonestly" 17 remotely was a "startling concession" and requested 18 further information in that regard. 19 Your Inquiry may investigate the extent to which 20 those who were advising the Post Office were provided 21 with sufficient information on which properly to advise. 22 It wasn't just Mr Altman or Sir Jonathan Swift who 23 provided advice to the Post Office. There was, of 24 course, a large legal team who represented and advised 25 the Post Office in respect of the Group Litigation. 161 1 Can I refer you to issues 178 to 181, sir, in the 2 completed list of issues. Your Inquiry is tasked to 3 determine whether the litigation strategy adopted by the 4 Post Office was appropriate, in doing so, you will wish 5 to consider the content of legal advice provided and the 6 extent to which the Post Office relied upon it in 7 adopting the strategy it did to the Bates litigation. 8 The Post Office was represented by Womble Bond 9 Dickinson LLP, previously just called Bond Dickinson, in 10 the Group Litigation. You will hear that the firm was 11 retained to provide advice in relation to other aspects 12 of the Post Office's response to the emerging scandal 13 but I focus on the GLO action in this opening. Before 14 I turn to discuss the litigation strategy in outline, 15 I must touch on why it is important to address issues 16 beyond the Bates case itself. 17 You will wish to consider out how that litigation 18 strategy influenced or affected the Post Office's wider 19 response to the emerging scandal. 20 In a letter at POL00006601 from Womble Bond 21 Dickinson to the Post Office, summarising advice that it 22 had given at a conference on 8 June 2016, it states that 23 Tim Parker, the chairman of the Post Office, was 24 continuing to consider the recommendations from the 25 Swift Review, which I raised earlier. The letter says 162 1 that the "very strong advice" was for Mr Parker's review 2 to cease, with some of the recommendations being 3 implemented by the legal team to seek to preserve 4 privilege. 5 Therefore, the Inquiry will investigate both the 6 effect of the litigation strategy on the Bates claimants 7 themselves but also on the wider impact that it had on 8 the Post Office's response to the emerging scandal as 9 a whole. In particular, you may wish to consider 10 whether the strategy in the Bates litigation resulted in 11 delays to the overturning of convictions or delays to 12 changes in practice in respect of Horizon. 13 I've already set out the background to the 14 substantive judgments by Mr Justice Fraser, upon which 15 this Inquiry builds. He was critical of the Post 16 Office's approach to the litigation. You will, in due 17 course, be referred to a significant amount of expert 18 and legal advice, much of which was previously 19 privileged, that fed into the Post Office's decision 20 making. In particular, you will be referred to the 21 input that Fujitsu had into preparing for the Horizon 22 Issues trial. Again, Gareth Jenkins emerges as a key 23 player in this regard. 24 You will also read the advice that the Post Office 25 received from legal professionals. You will read that 163 1 Womble Bond Dickinson provided advice to the Post Office 2 on the potential for a group action in 2014, and then 3 acted in the claims that arose, and that various leading 4 counsel -- Queen's Counsel, as they then were -- and 5 junior barristers, acted for the Post Office in this 6 action. As you would expect for such significant 7 litigation, the legal professionals provided advice 8 regularly and on a great range of matters. 9 You will read evidence of advice provided to Post 10 Office in steering group meetings, as well as in formal 11 notes and conferences. This advice ranges from the 12 merits of specific points of law as to how to approach 13 key events in the litigation, such as disclosure. By 14 way of example, Womble Bond Dickinson advised the Post 15 Office on the merits of pursuing counterclaims in the 16 GLO, recommending pursuing claims in debt for shortfalls 17 but not damages for loss of profits arising from 18 termination. That's POL00006618. 19 You will wish to consider the content of the advice 20 received, the extent to which the Post Office relied on 21 it and whether it was reasonable to do so. Accordingly, 22 it will be necessary to consider broadly the merits of 23 such advice. We do not suggest that you subject it to 24 detailed unless and approve or criticise it because you 25 either agree with it or disagree with it. The question 164 1 must of course be much broader and ask whether the 2 advice on which the litigation strategy was founded was 3 within the range of what a reasonable practitioner might 4 consider to be appropriate. 5 Moreover, you will wish to consider whether those 6 legal professionals were being given sufficient 7 information to advise the Post Office and Fujitsu. 8 One further point I should address is the recusal 9 application that was made in the Group Litigation. As 10 you are aware, an application for recusal is a serious 11 matter where a party asks a judge to step down from 12 hearing a claim, usually because of alleged actual or 13 apparent bias. It is clear that the Post Office's legal 14 team advised on concerns over Mr Justice Fraser's 15 handling of the litigation, prior to knowing the result 16 of the common issues trial. You will see an update note 17 to Post Office following a case management conference in 18 the Horizon Issues trial, which refers to the fact that 19 the judge did not censure the claimants for a last 20 minute change of position, stating this: 21 "... reinforced a growing concern that the judge is 22 not willing to call out bad conduct by the claimants' 23 lawyers even when it is blatant. We can only speculate 24 why he acts in this way, but believe this stems from 25 a fear of negative media comments and/or 165 1 an acknowledgement that the Claimants do not have the 2 best representation and so he is attempting to level the 3 playing field." 4 Following the draft judgment in common issues, the 5 Post Office's legal team gave initial advice that "the 6 judge's approach is astonishing; it is unfair and 7 unprecedented. With no hesitation, we strongly 8 recommend lodging an appeal." 9 That's POL00022940. 10 Leading counsel subsequently advised on the 11 prospects of success of an appeal, POL00023878, and also 12 recommended that the Post Office consider making an 13 application to seek the recusal of Mr Justice Fraser on 14 the grounds of apparent bias. 15 You will be aware that the test for apparent bias is 16 whether a fair-minded and informed observer, having 17 considered the facts, would conclude that there was 18 a real possibility that the judge was biased. If the 19 answer was yes, the judge must cease sitting on the 20 claim, irrespective of whether he was in fact biased. 21 This advice on recusal was given the day before the 22 Horizon Issues trial was due to start. The issuing of 23 a recusal application was described as "the nuclear 24 option". 25 It was clear that it would cause delay to the 166 1 Horizon Issues trial, even if unsuccessful. 2 The Post Office sought further advice on this issue 3 from a former President of the Supreme Court, 4 Lord Neuberger, and Head of his Chambers, Lord Grabiner, 5 in respect of the application for Mr Justice Fraser to 6 recuse himself. 7 On 14 March 2019 Lord Neuberger provided an 8 eight-page written advice entitled "Bates and Others 9 v Post Office Limited Observations on Recusal 10 Application". 11 That's at POL00006398. 12 Lord Neuberger advised that there were reasonable 13 grounds for the Post Office to bring an application to 14 recuse the judge, and that the Post Office "has little 15 option but to seek to get the Judge to recuse himself at 16 this stage". 17 Lord Neuberger is subsequently noted to have 18 attended a Post Office Board Meeting and provided 19 advice. That's POL00021562. 20 It was noted that Lord Neuberger could not represent 21 the Post Office because he was formerly a member of the 22 judiciary. 23 Shortly afterwards, Lord Grabiner is noted to have 24 given strong advice in conference that the Post Office 25 should pursue the recusal application. 167 1 That's POL00006397. No need to display the document 2 at the moment. 3 Within the conference note, it says as follows in 4 relation to what Lord Grabiner is said to have advised: 5 "Lord Grabiner explained that in his view if there 6 is no recusal application made then the Post Office will 7 lose the series of trials set up in this matter. 8 Without a recusal application, Post Office is stuck with 9 this judge. An appeal on the law may correct some of 10 the very significant errors in the Common Issues 11 Judgment, but then the case will be sent back to this 12 Judge who has demonstrable apparent bias against Post 13 Office and hence the firm conclusion that Post Office 14 will lose and the financial impact of that will be 15 substantial. Recusal is therefore essential, and 16 Lord Grabiner asserted that in the face of legal advice 17 from Lord Neuberger that recusal should be applied for, 18 and the quantum of damages that Post Office will pay out 19 on a loss, then it was Lord Grabiner's view that there 20 was a duty on Post Office to seek recusal. 21 Lord Grabiner stated that in his view, the Board of the 22 Post Office had no option but to seek a recusal." 23 The note of the conference recorded Lord Grabiner 24 advising that there were strong arguments in favour of 25 an application for recusal; it was his strong view that 168 1 recusal application was the right course of action; and 2 that there was a "serious prospect of success" and "that 3 this judge had done an unbelievable nonsense and 4 demonstrated apparent bias". 5 The application for recusal was made midway through 6 the evidence in the Horizon Issues trial. As a result, 7 the hearing had to stop whilst the Post Office's 8 application was determined. The application caused 9 significant delay and disruption to the Horizon Issues 10 trial and was subsequently rejected by 11 Mr Justice Fraser. 12 The Post Office sought to appeal that decision. 13 You'll be aware that the Post Office needed to obtain 14 permission to appeal by showing that there was a real 15 prospect of success, or some other compelling reason to 16 hear the appeal. Lord Justice Coulson refused the 17 application for permission to appeal, and delivered an 18 unusually lengthy set of reasons for doing so. Those 19 reasons were highly critical of the Post Office and 20 stated that "the recusal application never had any 21 substance". 22 Once again, the role of lawyers, some of them 23 senior, the sufficiency of the information they were 24 given, and the extent to which they were relied on 25 informing the Post Office's litigation strategy will be 169 1 examined. I have only examined one of the issues that 2 arises in this part of the Inquiry's list of issues. 3 Sir, that is I want to say about Phases 4 to 6. 4 Finally, and most likely around this time next year, 5 the Inquiry will address current practices and 6 procedures and recommendations for the future. By 7 examining, in Phase 7, current practice, sir, you will 8 be able to consider whether the Post Office, Fujitsu, 9 the Department for Business, Energy and Industrial 10 Strategy, and any other relevant organisations and 11 individuals have learned from these experiences or, on 12 the other hand, whether any further changes need to be 13 made by way of recommendations by you. 14 Sir, that's all I intended to say. I say "all" -- 15 it was quite a lot. That's all I wish to say in opening 16 the upcoming phases of the Inquiry to you, sir. I've 17 said to other Core Participants that it was unlikely 18 that I would finish before 4.10, and therefore it was 19 unlikely that that you would call on them today, and 20 therefore the subpostmaster Core Participants have 21 arranged for their clients to start viewing tomorrow 22 morning. I trust that wasn't out of order. 23 HOUSEKEEPING MATTERS 24 SIR WYN WILLIAMS: Not at all, Mr Beer. I'm very grateful 25 for your opening, and I look forward to hearing the 170 1 remainder of the openings. 2 Can I take it that you were all -- and I'm 3 addressing Mr Beer, but I'm talking to all the Core 4 Participants who wish to make an opening -- are you 5 still reasonably confident that we will complete all the 6 openings by a reasonable time on Friday? 7 MR BEER: Sir, yes we are, because Mr Moloney, Mr Stein and 8 Mr Henry have told me that their estimates have reduced 9 somewhat from those that were originally given, and in 10 any event we had, if you remember, the spare afternoon 11 on Friday afternoon. 12 SIR WYN WILLIAMS: Yes. I raised it in particular because 13 in our provisional timetable only 30 minutes was set 14 aside for UKGI, but in writing at least, there's quite 15 a long opening to be made by that party, so I just 16 wanted to be clear that it could all be accommodated 17 this week. 18 MR BEER: Yes. I don't think they've actually notified an 19 expanded time estimate. Mr Mertens is just getting to 20 his feet. 21 MR MERTENS: Yes, and thank you very much. We don't expect 22 to be more than 30 minutes. 23 MR BEER: Fantastic. Thank you very much. Just one piece 24 of house -- 25 SIR WYN WILLIAMS: Sorry, I missed that, Mr Beer. The 171 1 screen didn't move quickly enough. 2 MR BEER: I can repeat what Mr Mertens said. He got to his 3 feet and said they are not going to be more than 4 30 minutes, UKGI. 5 SIR WYN WILLIAMS: Fine. Right. Well, that solves the 6 problem. 7 MR BEER: It does. Just one piece of housekeeping. Can 8 I repeat, by way of parish notices to people, the need 9 to ensure that they lodge with the Inquiry at 10 "thecounsel@" email address any questions that they wish 11 to ask, or wish us to ask, of any witnesses in this 12 phase of the Inquiry 14 days before that witness gives 13 evidence. We haven't received many questions set so 14 far. Quite a few were received today, but they are 15 obviously a little late. We could, on one view, think 16 that that means nobody wants any questions asked, or 17 that they don't want to ask any questions themselves. 18 We don't think that's the case. 19 Can I therefore reiterate a plea that was sent out 20 in an email last night from the solicitors to the 21 Inquiry that such pro formas are received by 4.00 pm, 22 14 days in advance of the day on which the witness gives 23 evidence. It's not particularly for my benefit or the 24 counsel team's benefit so we can spent longer thinking 25 up our questions. It's so the Inquiry can notify 172 1 witnesses of the documents to which they may be 2 referred, and in many cases provide them with the 3 documents in hard copy. 4 A number of the people concerned are of an older 5 generation, and do not have access to information 6 technology that allows them to view documents online. 7 We therefore have to print all of the documents to which 8 they might be referred, bundle them up in a convenient 9 way, and courier them to them. 10 Any days that are missing under 14 days interferes 11 with that process very significantly. 12 SIR WYN WILLIAMS: Well, clearly, Mr Beer, I want to endorse 13 what you've just said. I think I should note that 14 perhaps unusually, in a modern Inquiry, I am prepared to 15 countenance persons other than you and your team asking 16 questions. 17 I thought that to be appropriate in this particular 18 Inquiry, but for that to work, we need to stick rather 19 rigidly to the timescales that you're talking about, 20 otherwise I fear we will get into all kinds of 21 logistical problems. 22 So I endorse entirely what Mr Beer has said. 23 MR BEER: Thank you very much, sir. So 10.00 tomorrow, 24 please. 25 THE CHAIRMAN: Yes. See you all tomorrow at 10.00. 173 1 MR BEER: Thank you. 2 (4.10 pm) 3 (The hearing adjourned until 10.00 am the following day) 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 174 I N D E X Opening statement by MR BEER .........................1 (continued) HOUSEKEEPING MATTERS ...............................170 175