Provisional View of the Chair on Compensation Issues relating to Prosecuted Sub-postmasters

Introduction

 

  1. On 21 July 2021 the Secretary of State for Business, Energy and Industrial Strategy announced that funds would be made available to the Post Office so that interim payments of compensation of up to £100,000 per person could be paid to sub-postmasters[1] whose convictions for dishonesty had been quashed. The announcement was made in a statement in Parliament and the relevant part was in the following terms:-

 

“The Court of Appeal handed down a landmark judgment on 23 April 2021, which quashed the convictions of 39 postmasters. A further 12 were quashed in the Court of Appeal earlier this week. Further convictions have been quashed in the Crown Court. The Government has been clear that we want to see compensation delivered fairly and as quickly as possible. We have also been clear that it is for the Post Office to engage with the individuals in the first instance regarding how compensation can be paid. I am pleased to provide an update on the steps to begin providing compensation to postmasters whose criminal convictions were based on Horizon data and have been quashed.

We have listened to affected postmasters and want to see them receive compensation quickly. The Government has therefore decided to support the Post Office so that it can make interim payments of up to £100,000 promptly to individual postmasters whose criminal convictions relied upon Horizon data and have been quashed, ahead of final compensation settlements being agreed with them. I am providing this support in my capacity as sole shareholder in the Post Office.

…….

Post Office is contacting the legal representatives of postmasters whose convictions have been quashed with further information about interim payments. We expect Post Office to issue offer letters for interim payments within 28 days of receiving a claim from eligible postmasters.

…….”

 

  1. In late 2021, I invited sub-postmasters who had been designated as Core Participants to make witness statements about the adverse impacts which they had suffered as a consequence of decisions made by Post Office Limited[2] in reliance upon information which had been generated by Horizon. I have received approximately 200 statements to date.  On 14 February 2022 I began hearing oral evidence from some of the Core Participants who had made such witness statements and, on the basis of what I had read in the witness statements and heard in oral evidence, I realised that there were a number of sub-postmasters who had been prosecuted by the Post Office[3] on the basis of evidence generated by Horizon but who had been acquitted of the charges brought against them. The evidence provided to me showed that there were sub-postmasters who had been acquitted after a trial of the charges brought against them; it also showed that the Post Office had withdrawn or discontinued prosecutions against a number of sub-postmasters prior to or on the date of the trial.

 

  1. One such person was Mrs Susan Hazzelton who gave oral evidence to the Inquiry on 17 February 2022 and who described how the Post Office had withdrawn a charge of theft against her shortly before her trial was due to begin.

 

  1. As I stated publicly after Mrs Hazzelton had completed her evidence, I felt a sense of unease about the fact that persons whose convictions had been or would be quashed were apparently eligible for substantial interim payments of compensation yet there was, so it seemed, no specific mechanism or scheme in place for the making of interim payments to those who had endured being prosecuted but had either been acquitted by a jury or magistrates  or acquitted at the direction of a judge following discontinuance or withdrawal of proceedings. Accordingly, I invited Howe + Co and counsel instructed by them (who acted for Mrs Hazzelton and who also acted for a large number of other Core Participants) to provide me with written submissions upon two issues.  They were (a) whether or not a person who had been prosecuted for a crime but who had been acquitted could maintain a civil claim for malicious prosecution and (b) whether any person prosecuted by the Post Office but acquitted of the charge brought against them fell within any of the then existing compensation schemes set up to deal with claims by those adversely affected by Horizon.

 

  1. I received the written submissions which I had requested on or about 25 February 2022. I published the submissions on the Inquiry’s website on 21 March 2022. On that same date I invited the legal representatives of Core Participants (other than Howe + Co) to make written submissions upon whether three classes of persons were eligible to claim compensation under schemes which were being administered by Post Office Limited. The three classes of persons were:-

(i) Sub-postmasters who were charged with criminal offences and prosecuted by the Post Office but who were acquitted after a trial (“Category 1”).

(ii) Sub-postmasters who were charged with criminal offences and prosecuted by Post Office but whose cases were discontinued or withdrawn before trial (“Category 2”).

(iii) Sub-postmasters whose appeals were conceded by the Post Office on the grounds that it would not be in the public interest to retry their cases and whose convictions have been overturned by the Crown Court (“Category 3”).

 

  1. In response to my invitation, I received detailed written submissions on behalf of the Core Participants represented by Hudgell Solicitors[4] and from Herbert Smith Freehill on behalf of Post Office Limited. Those representing the Department of Business, Energy and Industrial Strategy (BEIS) made brief submissions and those representing United Kingdom Government Investments (UKGI) indicated that they did not intend to make submissions. The written submissions made on behalf of the clients of Hudgell Solicitors, Post Office Ltd and BEIS are published today alongside this statement.

 

Compensation Schemes and/or mechanisms currently existing [5]

 

  1. In order to understand how such schemes and/or mechanisms have come to exist it is necessary to explain, in summary, the litigation which commenced in 2017 between Mr Alan Bates and other Claimants and Post Office Limited and which is known as the group litigation. In this litigation the Claimants sued for compensation for alleged losses consequent upon breaches of contract and other alleged wrongful acts arising out of decisions made by Post Office Limited in reliance upon information generated by Horizon. These proceedings were bitterly contested over approximately 2 years; they were brought to an end by a Deed of Settlement dated 10 December 2019. During the course of the litigation the managing judge handed down 6 judgments; 2 of those judgments, the Common Issues judgment and the Horizon Issues judgment, were, no doubt, critical to the decision made by Post Office Limited to offer terms of settlement and they are now crucial sources of evidence for this Inquiry.

 

  1. The Deed of Settlement which brought the litigation to a conclusion is a detailed legal agreement which must be read as a whole for a full understanding of its terms and effect. Nonetheless, certain of its terms are directly relevant to the issues addressed in this statement and, in consequence, I set them out in summary form. By clause 2.1, Post Office Limited agreed to make “settlement payments” which, in aggregate, amounted to £57.75m. Of that sum, £15m was earmarked for the legal costs of the solicitors and barristers who had acted for the Claimants in the group litigation; £42m was paid over “by way of damages, litigation funding, ATE Costs or other costs, or other relief claimed in the Action” (the Settlement Payment). Clause 3 provided that none of the terms of the Settlement Deed were to be construed as an admission of liability on the part of Post Office Limited in respect of any of the various claims made by the Claimants and which were the subject of the litigation.  Clause 4.1 provided that the terms of settlement set out in the Deed were to be in full and final settlement of all the claims made by the Claimants save for claims brought for malicious prosecution (clause 4.2.2) which were defined as being claims brought by “Convicted Claimants” (see the definition section in clause 1). The rationale for this provision was set out in clause 7. Clause 9.4 and Schedule 6 of the Deed laid the foundation for the establishment of what is known as the Historical Shortfall Scheme.

 

  1. It has been widely reported that approximately £10.5m of the £42m set aside as the Settlement Payment was shared between the Claimants as compensation for the losses which they claimed in the litigation and that a very substantial proportion of the Settlement Payment was swallowed up in litigation funding and other costs. Most, if not all, of the Claimants received a sum by way of compensation which was substantially less than the alleged losses which they had claimed in the group litigation. On the basis of the evidence I have read and heard to date, it is clear that very many, if not all, of the Claimants in the group litigation feel very strongly that they did not receive compensation which was fair and/or adequate and, indeed, it is now accepted in public statements by Post Office Limited and the UK Government that they did not. It is worthy of some note that within a short time of the Deed of Settlement being concluded the Claimants and, in particular, Mr Bates and an umbrella organisation known as “Justice for Subpostmasters Alliance” (“JFSA”) began a campaign in which a primary aim was to achieve “fair and proper” compensation for the Claimants in the group litigation.

 

  1. It is against this background that I turn to the compensation schemes and/or mechanisms which have come into being.  

 

  1. The Historical Shortfall Scheme was established in 2020 in accordance with the terms of the Settlement Deed. It is a remediation scheme, properly so called. I have recently received correspondence from Howe + Co and Hudgell Solicitors in relation to the operation of this scheme which is the subject of a separate announcement. However, it is important to make three points in this statement. First under its terms none of the Claimants who had been party to the group litigation were eligible to seek compensation under the Scheme. The Historical Shortfall Scheme was and is intended to benefit all those sub-postmasters who suffered loss as a consequence of Horizon but who were not party to the group litigation. Second, the Scheme identifies a number of principles upon which compensation under the Scheme must be assessed.[6] Third, the Scheme includes detailed provisions (dispute resolution procedures) for resolving how claims should be determined in the event that an applicant and Post Office Limited cannot agree upon the compensation which should be awarded.

 

  1. The Scheme has now closed. Post Office Limited report that 2523 applications under the Scheme were received of which 2368 have been assessed as being eligible. As of 4 May 2022, 1,303 offers of compensation have been made to applicants of which 993 have been accepted. There are currently 60 cases in which an applicant and Post Office Limited are seeking to resolve the applicant’s claim within the dispute resolution procedures under the Scheme.

 

  1. On 21 July 2021 the Secretary of State made the announcement which is set out at paragraph 1 above. As far as I am aware no formal remediation scheme was constituted thereafter. In practice those whose convictions had been quashed applied to Post Office Limited for an interim payment and, in the main, Post Office Limited made such a payment within weeks of the application.[7] As appears to be crystal clear from its terms, the Secretary of State’s announcement was and is concerned only with sub-postmasters whose convictions have been quashed (or will be quashed).

 

  1. On 14 December 2021 the Minister[8] made a further statement which is relevant to the payment of compensation to sub-postmasters whose convictions have been or will be quashed. The salient parts read as follows:-

 

“I am pleased to confirm that today the Government is making funding available to facilitate Post Office to make final compensation payments to postmasters whose convictions have been overturned. We are working with Post Office to finalise the arrangements that will enable final settlement negotiations to begin as soon as possible. By providing the funding, Government is helping Post Office to deliver the fair compensation postmasters deserve.

With the Secretary of State’s status as sole shareholder in the Post Office, my Department continues to engage actively with Post Office Limited on that and will maintain strong oversight of the compensation process.”

 

I have not yet sought evidence from the Post Office and/or BEIS as to what progress has been made in making final payments of compensation in accordance with this announcement but I have seen no public announcement to the effect that a remediation scheme has been adopted under which any such payments are to be or have been assessed.[9] Further, there have been reports in recent days that many of the sub-postmasters whose convictions have been quashed have begun or will begin civil proceedings against Post Office Limited for compensation because they are unhappy about the lack of progress in assessing final compensation and because there appears to be a wide gulf between their valuation of their claims and the views of Post Office Limited as to their value.

 

  1. On 22 March 2022 the Minister made an announcement in Parliament the relevant parts of which are as follows:-

 

“ ………

 

The Government has long considered unfair the unequal treatment received by members of the GLO[10] and their non-GLO peers. I am therefore pleased to announce that the Chancellor will make additional funding available to give those in the GLO group compensation similar to that which is available to their non-GLO peers.

 

Because they had signed a “full and final” settlement of the court case in 2019, postmasters in the group were ineligible to apply to the Historical Shortfall Scheme (HSS) which the legal action had established. So despite winning the case, the group was left worse off than other affected postmasters for whom they had blazed the trail.

 

………”

 

This announcement was given a cautious welcome by those to whom it applied. As yet, however, there has been no public announcement as to how the Minister proposes effect is to be given to his announcement.

 

Provisional View on Categories 1,2 and 3 identified at paragraph 5 above

 

  1. I have formed a provisional view on the basis of the written submissions which I have received as to the eligibility of the three classes identified at paragraph 5 above to claim compensation under the schemes and/or mechanisms which are being administered by Post Office Limited. However, I have concluded that it is appropriate to afford the legal representatives of the Core Participants an opportunity to make oral submissions addressing the preliminary view which I set out below at a hearing which will be scheduled in between 4 and 15 July 2022.

 

  1. Persons who are acquitted of criminal charges are entitled to sue the prosecutor for damages for the tort of malicious prosecution. Accordingly, persons within Categories 1 and 2 as set out in paragraph 5 above were entitled to bring civil proceedings against Post Office Limited for the tort of malicious prosecution as from the date of their acquittals. Claims of this type can be complicated and it would be very costly, potentially, for individuals who were acquitted of criminal charges to maintain a civil action for damages for malicious prosecution.  

 

  1. Further, Claimants in the group litigation who fall within Categories 1 and 2 may have brought such a claim within those proceedings. Subject to what I say at paragraph 20 below that would mean that their claims for compensation for malicious prosecution had been settled by the terms of the Deed of Settlement (clause 3 thereof).

 

  1. Claimants in the group litigation falling within Categories 1 and 2 were not entitled to seek compensation for malicious prosecution under the Historical Shortfall Scheme. That is because the Claimants were not eligible to make any claim under that Scheme. However, persons falling within Categories 1 and 2 but who were not Claimants in the group litigation were eligible to make a claim for compensation for malicious prosecution under the Scheme. As I have said already, the Scheme is now closed.

 

  1. In their written submissions both Post Office Limited and BEIS suggest that Claimants in the group litigation falling within Categories 1 and 2 will be eligible to claim compensation for malicious prosecution by virtue of the Minister’s announcement of 22 March 2022. That issue is not addressed in the submissions made on behalf of the Core Participants represented by Howe + Co[11]; nor is it addressed in the submissions made on behalf of the Core Participants represented by Hudgell Solicitors[12]. It is my provisional view, however, that Post Office Limited and BEIS are correct to suggest that Claimants in the group litigation who fall within Categories 1 and 2 can claim compensation for malicious prosecution in reliance upon the Minister’s announcement. As I have said, to date no details of how the Minister’s announcement will be translated into a remediation scheme or mechanism for making awards of additional compensation have been made public. However, it appears from the words of his announcement that the Minister intends that the Claimants in the group litigation should receive additional compensation so that they are compensated on the same basis and by reference to the same principles as those who have been compensated under the Historical Shortfall Scheme. Media reporting has suggested from time to time that there are discussions ongoing between representatives of the Claimants and BEIS and/or Post Office Limited about this issue but there are no recent reports of much activity on this front.

 

  1. BEIS suggests that persons within Categories 1 and 2 who were not Claimants in the group litigation are eligible to make claims for compensation for malicious prosecution in reliance upon the Minister’s announcement of 14 December 2021. That suggestion is not made by Post Office Limited.

 

  1. On the basis of the words used by the Minister in his announcement, I do not consider that the suggestion made by BEIS can be correct. The announcement of 14 December 2021 appears to be confined in its scope to persons who were convicted and whose convictions have been quashed - see paragraph 14 above. However, the Ministerial Statement stresses that the Minister proposes to exercise strong oversight of the compensation process and it may be that the Minister intends that if there are persons who (a) were not Claimants in the group litigation (b) did not avail themselves of the Historical Shortfall Scheme but (c) were acquitted of criminal charges which were founded on evidence generated by Horizon they should now be included within the ambit of his announcement on 14 December 2021.

 

  1. I should explain that I am not currently aware of persons within Categories 1 and 2 who were not Claimants in the group litigation, who did not avail themselves of the Historical Shortfall Scheme and who were acquitted of criminal charges based upon evidence generated by Horizon but it is, of course, possible that such persons may exist. The Minister or BEIS will have the opportunity to clarify his/its position in respect of such individuals at the hearing to which I have referred but it can, of course, choose to do so much earlier.

 

  1. I turn to consider the position of persons falling within Category 3. To date, there are 3 Core Participants (all represented by Hudgell Solicitors) who fall into this category. The Core Participants in question are Ms. Adedayo, Mr. Kalia and Mr. Patel. Post Office Limited have refused those persons an interim payment pursuant to the Minister’s announcement of 21 July 2021 for the detailed reasons which are set out in paragraphs 36 to 40 of its Written Submissions. In summary, Post Office Limited argue that in each case there was evidence independent of that which was generated by Horizon (alleged confessions) which was capable, if accepted, of justifying convictions and, accordingly, at least arguably, the prosecution of these individuals was justified and their prosecution was not malicious notwithstanding that the quashing of their convictions was not opposed.

 

  1. Despite this stance, Post Office Limited accept that these persons are eligible to seek a final award of compensation pursuant to the Minister’s announcement of 14 December 2021 albeit it does not commit itself to making final awards which include payments for malicious prosecution. I understand, too, that there may be ongoing discussions between Hudgell Solicitors and Herbert Smith Freehill about the payment of compensation in at least 2 of these cases.[13]

 

  1. The lawyers acting for Ms. Adedayo, Mr. Kalia and Mr. Patel complain that the refusal of interim payments in their cases was unfair. They set out their reasoning in support of this position at paragraphs 29 to 43 of their Written Submissions.  

 

  1. I must be careful to guard against making myself the arbiter of disputes between Post Office Limited and Ms. Adedayo, Mr. Kalia and Mr. Patel  about whether they are eligible for an interim payment or a final award of compensation under the Minister’s announcements of 21 July 2021 and 14 December 2021. That is not my function under my terms of reference; nor do I have any power to compel Post Office Limited to comply with any view I might express or any determination I might make. However, I am satisfied that I am entitled to consider and assess the overall fairness of any remediation scheme or mechanism for providing compensation.

 

  1. On the basis of the evidence I have received to date, and in the light of the written submissions made in relation to persons falling within Category 3, I have formed the preliminary view that fairness demands that Post Office Limited should not be the final arbiter of whether an interim or final payment of compensation should be made in accordance with the Minister’s announcements of 21 July 2021 and 14 December 2021. Rather, if, as in the cases of Ms. Adedayo, Mr. Kalia and Mr. Patel, there is a dispute about entitlement to compensation the dispute should be determined by an independent person or panel. That is the position, in essence, if disputes arise under the Historical Shortfall Scheme and it is difficult to see why similar provisions should not exist if proper effect is to be given to the Minister’s announcements.

 

Response to recent events

 

  1. Finally, I feel obliged to highlight the following. First, apparently, little progress is being made towards assessing final compensation for sub-postmasters whose convictions have been quashed in accordance with the Minister’s announcement of 14 December 2021. That announcement spelled out the need to finalise matters expeditiously. It certainly did not contemplate that within months of it being made, sub-postmasters would be contemplating or issuing further civil proceedings. Second, although the Minister’s announcement of 22 March 2022 was, no doubt, very welcome to the Claimants in the group litigation it is extremely important that effect is given to the announcement as expeditiously as possible. No doubt these two issues will be the subject of detailed submissions at the hearing which I have decided to convene.

 

 

Sir Wyn Williams

9 May 2022

 

 

 

 

[1] In this Statement the term sub-postmaster is used to mean sub-postmasters, sub-postmistresses, their managers and assistants and any person employed by Post Office Limited or its predecessor companies who claim to have suffered loss by reason of the Horizon IT System (“hereinafter referred to as “Horizon”).

[2] Post Office Limited is used as an umbrella term for that company and all its predecessor companies.

[3] The phrase the Post Office encompasses all those companies and/or organisations which prosecuted sub-postmasters in the period 1 January 2000 to 31 December 2013.

[4] Hudgell Solicitors represent 54 Core Participants all of whom were convicted of offences of dishonesty.

[5] In the submissions on behalf of Post Office Limited a distinction is drawn, correctly, between a formal “remediation scheme” and other means of providing routes to compensation which are referred to as “mechanisms”. I have adopted this language.   

[6] For details of these principles see the Terms of Reference of the Scheme and “Consequential Loss Principles and Guidance”.

[7] As of 31 March 2022, 69 applications for interim payments have been made to Post Office Limited of which 66 have been successful.

[8] In this statement the phrase “the Minister” is a reference to the Minister for Small Business, Consumers and Labour Markets.

[9] I understand that as of 8 April 2022 8 persons had applied for final awards of compensation but no awards had been made – see paragraph 30 of the written submissions on behalf of the Post Office Limited.

[10] The phrase members of the GLO is a reference to the Claimants in the group litigation.

[11] These submissions pre-date the announcement made on 22 March 2022.

[12]That is not surprising since Hudgell Solicitors do not represent any persons within Categories 1 and 2.

[13] See paragraph 41 of the written submissions on behalf of Post Office Limited.

Hudgell Submissions on Compensation.pdf
Post Office Limited Submissions on Compensation.pdf
BEIS Submissions - Compensation.pdf