Understanding the role of the law in the Post Office scandal part 1: the beginning of the crisis

This is the first in a three-part series examining how the law allowed the Post office scandal to happen and  the role now being played by the law and those who work within it in redressing what has been described as the largest miscarriage of justice in legal history. In particular, it looks at how the Post Office was able to bring criminal prosecutions against so many and what is now being done to overturn those wrongful convictions. This part considers the background to the crisis, the beginning of public interest and the proceedings in the High Court.

Background and the beginning of the crisis: 2000 – 2012

The Post Office operates over 11,000 branches in the UK. It subcontracts the running of its branches to sub-postmasters (SPMs), who are not employees of the Post Office but are self-employed businesspeople. The Post Office plays a vital role in the community, particularly in some rural areas where it provides the only means for individuals and businesses to access cash, banking and financial services.

Before 2000, SPMs accounted to the Post Office using a paper-based system. In 2000 the Horizon system was introduced which in effect computerised the accounting system. Horizon was designed and installed by ICL, later subsumed into Fujitsu.  All SPMs were required to use it. From the time of its introduction, SPMs began to experience unexplained discrepancies and shortfalls. Their position was that these must have been caused by issues with the Horizon system, although the way the system operated meant it was impossible for SPMs to investigate discrepancies themselves. SPMs were told that they were the only people experiencing difficulties.

The Post Office maintained the system was robust and that any shortfall was entirely down to carelessness, fault or criminality on the part of the SPMs. Under the terms of their contract with the Post Office, SPMs were required to make good any shortfalls in the accounts. As a result, SPMs paid  money to the Post Office even if they didn’t believe or accept there were deficiencies in accounting. Whilst some sums were modest, others were significant and led to SPMs losing their savings, their homes and even being made bankrupt. SPMs that refused to pay lost their position. Some SPMs were accused of theft, fraud and/or false accounting and were subject to criminal investigation by the Post Office. Between 1991 and 2015, 918 successful prosecutions were brought by the post office against SPMs and other employees. In each case, the Post Office relied on evidence from Fujitsu operatives as to the reliability of the Horizon system. Many of the SPMs went to prison. Those that didn’t were subject to serious penalties. All suffered financial losses.  All suffered reputational damage and humiliation, the cases often being widely reported in the local press.

The beginning of public interest and initial action by the SPMs: 2012 – 2015

Alan Bates, a SPM from Llandudno who was removed from his position after refusing to make good the discrepancies, was central in forming an action group called Justice For Sub Postmasters Alliance (“JFSA”).  This group brought the crisis to the attention of MPs, which in turn led to the Post Office setting up an Independent Inquiry led by Second Sight in 2012. Second Sight, together with the Post Office and JFSA, set up a mediation and compensation scheme, but both came to an end in 2015 without resolving the issues. But the issue remained on the parliamentary agenda and began to attract mainstream media interest, most notably the “Trouble at the Post Office” Panorama documentary which was broadcast in August 2015. Despite the increasing public interest, however, no answers or means of redress were forthcoming.

The Civil Litigation: High Court 2017 – 2019

The press interest brought the JFSA to the attention of litigation lawyer James Hartley, who advised the SPMs to bring a civil legal action against the Post Office to recover their losses.  In January 2017, the High Court granted a Group Litigation Order enabling around 550 SPMs to begin such an action. Mr Justice Fraser (Fraser J) was assigned as the managing judge.  The action was strongly contested by the Post Office. During the proceedings the Post Office was forced to disclose huge amounts of documentation relating to the operation of the Horizon system which showed employees of both the Post Office and Fujitsu knew about the issues with the system.  Due to the sheer scale of the action, it was broken down into a number of cases. On 15^th March 2019, Fraser J gave his ruling on some of the issues common to the SPMs. Ruling in favour of them, he found the Post Office had shown oppressive behaviour in dismissing SPMs for accounting errors and that the Post Office had misstated the liability of the SPMs to make good any shortfall, which amounted to oppressive behaviour. He was critical of the Post Office’s behaviour both then and now in dealing with the case, describing it as fearing being scrutinised and operating with a culture of excessive secrecy. He described the Post Office’s ignorance and denial of the issues with Horizon as “the 21^st century equivalent of maintaining that the earth is flat”.

Fraser J handed down his second judgment in December 2019, dealing specifically with Horizon. He made findings, supported by documentation obtained from the Post Office, that the Horizon system did suffer bugs, errors and defects that posed a risk to the systems operating in the branches, and that the SPMS had not been told about them. It also found that Fujitsu had the ability to amend the Horizon data in relation to a branch without the knowledge of the SPM concerned, something which had been long denied by the Post Office.

In the light of Fraser J’s findings, the Post Office agreed to settle the claim with the SPMs for the sum of £57m. After the payment of legal costs, this left those SPMs who had joined the litigation with around £20,000 each, nowhere near sufficient to compensate them for what they had lost, either financially or emotionally.

Part two will discuss the role of a prosecutor, abuse of power and the overturning of criminal prosecutions in relation to the Post Office.

If you have been affected by the Post Office and Horizon scandal, please contact Sian Darlington here.