Post Office told to pay over £5m of its opponent’s costs for first Horizon trial

The Post Office was ordered to pay 90% of the costs for the claimants incurred in the first trial in its court battle with 550 former subpostmasters who are suing for damages for suffering caused by alleged faults in the Horizon IT system they use to run branches.

In the same court hearing, Judge Fraser, who is managing the group litigation order (GLO), refused the Post Office permission to appeal his judgment in first Horizon trial.

The Horizon accounting and retail system, which was introduced in 1999/2000, is used by nearly 12,000 post office branches, and is the centre of the case.

Subpostmasters have been held liable for any unexplained losses, and in 2009, Computer Weekly told the stories of seven postmasters who suffered life-changing hardship as a result of problems they blame on Horizon. Some received heavy fines and had to repay thousands of pounds because of unexplained shortfalls in their accounts, some lost their life savings and went bankrupt, and others subpostmasters were sent to prison (see timeline of Computer Weekly coverage below).

A hearing in the High Court on 23 May began on the matter of the request lodged by the Post Office a few days earlier to appeal the judgments from the first trial in the GLO. The first month-long trial, held late last year, focused on the contractual relationship between the Post Office and subpostmasters. This was the first of four planned trials.

In his judgment for the first trial, announced in March, Judge Fraser said there was a general culture of secrecy and confidentiality in the Post Office, particularly around the Horizon accounting and retail system used by subpostmasters to run their branches.

He issued significant judgments on the nature of the relational contract between subpostmasters and the Post Office. Criticisms of the Post Office included “oppressive behaviour” when demanding sums of money that could not be accounted for by subpostmasters.

In court this week, the Post Office legal team requested permission to appeal 37 points of law, three of fact and eight of process, but Judge Fraser refused the request from Post Office’s legal team for permission to appeal. The Post Office has the option to go to the Court of Appeal.

The court also heard arguments over a claim submitted on 29 March for the claiment’s legal costs for the first trial. Freeths, the solicitors acting for the subpostmasters, did this after the judgment came out heavily in favour of the claimants. 

The fact the claimants won the vast majority of the points in dispute was reflected in Judge Fraser’s order that the Post Office should pay 90% of the claimant’s costs on account.

The Post Office legal team argued for the payment to be reserved until the case is complete. Post Office QC David Cavender argued that the case has not been won by the claimants as the first trial is just part of it.

“The winner is the winner of the game, not the person that at the first stage gets its rules adopted and approved by the court,” he said.

But Fraser ordered that the costs would not be reserved, but paid on account. After much deliberation, a figure of about £5.5m including VAT was ordered to be paid on account.

The Post Office requested permission to appeal the order to pay now rather than reserve payment until the end of the case, but Fraser refused and the Post Office has 21 days to pay. Judge Fraser also indicated that the final outcome of the GLO will not be until the middle of 2020 at the earliest.

Funds are critical in group litigation and, due to the many millions of pounds in costs, the claimants’ case is being funded by Therium through third-party litigation funding, which involves a number of funders investing in litigation, paying fees and other costs. If the case succeeds, they make a profit, but their investment is at risk if the case is lost.

When discussing the high costs of the case, Judge Fraser said the last time he was updated on the costs to the Post Office so far, the figure was more than £12m.

He said the legal teams were originally supposed to inform him every time their costs went up by £250,000.

“Then they were writing so often that it was changed to half a million. The most recent letter I received was one from the Post Office which told me that their costs were £12.8m,” said Fraser.  “That was earlier this month, but it didn’t include, so far as I know, the £300,000 that was agreed and the consent order for today about the recusal costs.”

Alan Bates, lead claimant and leader of the Justice for Subpostmasters Alliance, said: “We are delighted that the court continues to see errors in Post Office’s conduct. Yet again, the court has identified faults and failures and rightfully awarded costs to the claimant group. Every appeal by Post Office just adds further delay and cost to these proceedings.”

Former MP and now Conservative peer James Arbuthnot said: “Post Office is spending the taxpayers’ money on defending the indefensible. It is now time the government stepped in to halt this cruel profligacy. It will not get better by being drawn out for longer – it will get much, much worse.”

This case is currently part way through the second trial, which covers disputes related to the Horizon system itself. During the second trial, which began in March and focused on the Horizon computer system, the Post Office made an application for the judge to recuse himself for alleged bias, following his judgment. After being refused by Judge Fraser, the Post Office went to the Court of Appeal, but its application was rejected.

Trial two was suspended when the recusal request was made, but will restart on 4 June when expert IT witness evidence will be heard. The case continues.