Alan Bates and Others v Post Office Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fraser |
| Judgment Date | 15 March 2019 |
| Neutral Citation | [2019] EWHC 606 (QB) |
| Docket Number | Case No: HQ16X01238 |
| Court | Queen's Bench Division |
| Date | 15 March 2019 |
[2019] EWHC 606 (QB)
THE HONOURABLE Mr Justice Fraser
Case No: HQ16X01238
THE POST OFFICE GROUP LITIGATION
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
Rolls Building
Fetter Lane
London, EC4A 1NL
Patrick Green QC, Kathleen Donnelly, Henry Warwick, Ognjen Miletic and Reanne Mackenzie (instructed by Freeths LLP) for the Claimants
David Cavender QC, Owain Draper and Gideon Cohen (instructed by Womble Bond Dickinson LLP) for the Defendant
Judgment (No.3) “Common Issues”
Hearing dates: 7, 8, 12, 13, 14, 15, 19, 20, 21, 22 and 26 November 2018 3, 4, 5 and 6 December 2018
Draft distributed to parties on 8 March 2019
A. Introduction
This judgment is in the following parts:
Appendix 1: Extracts of the relevant SPMC terms
Appendix 2: Extracts of the relevant NTC terms
Appendix 3: Agreed Flow chart for Transaction Corrections
Appendix 4: Agreed Flow chart for Branch Trading Statement
Appendix 5: Appendix 2 of document dated 7 September 2012 entitled Branch Audit Trend Analysis YTD Q1 2012/2013 {G/7/6}
| Paragraph no. | |
| A. Introduction | 1 |
| B. The Common Issues | 44 |
| C. The Lead Claimants | 46 |
| D. The Post Office Witnesses | 365 |
| E. The Factual Matrix | 568 |
| F. The Relationship between the Post Office and the National Federation of Sub Postmasters (“NFSP”) | 574 |
| G. Contractual Formation | 599 |
| H. The Contract Terms | 607 |
| I. Express and Implied terms | 690 |
| J. Relational Contracts | 702 |
| K. Supply of Goods and Services Act | 769 |
| L. Agency, Accounting and Horizon | 782 |
| M. Suspension and Termination | 865 |
| N. Assistants | 938 |
| O. Onerous or Unusual Terms | 957 |
| P. Unfair Contract Terms | 1063 |
| Q. Conclusions and Summary | 1111 |
| R. Answers to the Common Issues | 1122 |
These proceedings are being conducted pursuant to a Group Litigation Order (“GLO”) made on 22 March 2017 by Senior Master Fontaine. Although there is an introduction to these proceedings in both my first and second written judgments in this matter, both of which concern procedural rather than substantive issues, which are at [2017] EWHC 2844 (QB) and [2018] EWHC 2698 (QB), I provide a similar introduction here. This is in order that this judgment can serve independently and be as comprehensible as possible to a reader with no background information to the litigation from those earlier judgments.
In general terms, in this Group Litigation there are a group of approximately 550 Claimants, who were all for the most part sub-postmasters, although a small number were Crown Office employees and managers/assistants. These have contracts of employment with the Defendant which are different to the contracts of the sub-postmasters. Some of the Claimants therefore have a different status to the sub-postmasters generally. However, it is the contracts with sub-postmasters that are relevant to this Common Issues trial. The Defendant, as is well known, operates the network of over 11,000 Post Office branches throughout the UK. The Defendant used to be called Post Office Counters Ltd, and changed its name in 2002 to simply Post Office Ltd. It refers to itself as “Post Office”, without the use of the definite article, and I was told (although none of the witnesses seemed particularly clear about this) that this may be for copyright reasons. In some of the documents, it referred to itself as POCL when it was called Post Office Counters Ltd. I shall refer to it in this judgment as the Post Office. It is state owned.
All of the Claimants (regardless of their precise individual status, and whether they were individually either sub-postmasters or Crown Office employees) at the material times were responsible for running branch Post Offices. “Material times” obviously means different periods for each claimant, as the dates upon which they became sub-postmasters or Crown Office employees differ between them, as do the dates upon which they ceased to have that status. The Post Office has been independent of Royal Mail Group since 2012, when the Postal Services Act 2011 came into force. The Post Office is not responsible for delivering mail. It does however provide postal based and other services to the general public. The range of services it offers has developed and changed over time. A customer of today probably expects far more of his or her local Post Office than would have been the case 30 years ago. As an example, it is no longer possible to purchase a vehicle license (what used to be a paper “car tax disc”) at a Post Office, or cash a Giro for payment of state benefit, but one can change foreign currency, purchase tickets to play the National Lottery, as well as perform other financial transactions. Post Office branches, often in rural areas, are the hub of the community in terms of these and other services. Sub-postmasters would, and do, often run the Post Office within a shop or other small business. The sub-postmaster would receive compensation from the Post Office for running the branch. This would be dependent upon the amount of business performed at the branch. The Post Office provides a large number of services for other companies through the post office branches. These other companies are called the Post Office's “clients”. For example, Camelot (which runs the National Lottery) makes its games available, through lottery scratch cards and bi-weekly lotteries, to the customers who will buy such products in a post office branch. Camelot is a client of the Post Office.
In about 1999/2000, the Post Office introduced a new computerised system for the accounting function both in the branches, and between the branches and itself. This was (and still is) called Horizon, or the Horizon system. Nowadays, it is an online system, having become a different system called Horizon Online in 2010. In 2000 and for some years afterwards, it operated down a telephone line, called the Official Branch Telephone Line. The requirement upon the sub-postmasters to provide this was stated in the following terms “The Official Branch Telephone Line must be provided by BT in order that Post Office Ltd may use the line for the Post Office Ltd Asymmetric Digital Subscriber Line [ADSL] service.” Private use of this line by the sub-postmasters was permitted, but only if this did not conflict with its use as the ADSL service. If it did conflict, the private use was to cease. Horizon was an electronic point of sale and accounting system, and was adopted by the Post Office for all its branches. It was a computerised system with both hardware and software, as well as comprising communications equipment in the branches and central data centres.
Those of older generations who remember a time before smart phones, broadband and wi-fi, may recall the days of dial-up modems and other even older IT technology. There is no doubt that digital technology, and the capacity and use of micro-processors and IT systems generally, has increased exponentially over the last 20 years or so. Back in the year 2000, almost a lifetime ago in terms of computer technology, I have no doubt that Horizon was seen as a cutting-edge development and it moved branch accounting for the Post Office into the computer age. It was operated through a dedicated Horizon terminal installed at the branch, and indeed most branches would have more than one such terminal.
However, regardless of the intention of those behind the design, adoption and installation of Horizon, this Group Litigation has at its core the Post Office's use of the Horizon system and the way that system itself operated. All of the Claimants were users of the Horizon system, and indeed they were required to use the Horizon system by the Post Office. There was no “opt in” or “opt out” alternative, and to be fair to the Post Office, if a large entity is going to move into the digital age, it would have made no sense to have done so piecemeal. However, the Claimants' case is that the Horizon system contained, or must have contained, a large number of software coding errors, bugs and defects, and as a result of this threw up apparent shortfalls and discrepancies in the accounting of different branches. Alleged shortfalls in the Claimants' financial accounting with the Post Office are said, on the Claimants' case, to have been caused by these problems with the way the Horizon system operated, the training that was provided to use it, and also a general failure of the Horizon helpline. These shortfalls and discrepancies, it is said by the Claimants, originated after Horizon started being used. Horizon was designed and installed by ICL, and then in about 2002 ICL was acquired by Fujitsu Ltd, a very well-known IT company. Neither ICL nor Fujitsu is a party to these proceedings.
The different Claimants all had different experiences with Horizon over different periods of time. However, there is at least one common theme. At the time, these accounting shortfalls that came to the notice of the Post Office were pursued as exactly that – shortfalls — with the relevant Claimants. The Post Office's stance both then, and now, was and is that the Claimants were responsible for these shortfalls, and that the shortfalls represented actual amounts of money missing from the Claimants' accounting. An alternative way of putting what may amount to the same point, but using the approach of the pleadings, is that the Post Office maintains it is for individual sub-postmasters to prove that the shortfalls were not their individual responsibility, and failing proof of that by an individual sub-post-master, then the shortfalls were their individual responsibility and the sub-postmaster in question would have to pay the relevant sum to the Post Office and face the consequences.
I am going to deal with the individual circumstances of the six...
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