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Only government standing in the way of fair compensation for subpostmasters

The UK government is the only block to fair compensation for subpostmasters who were wrongly punished for accounting shortfalls

The government is the only obstacle to victims of the Post Office Horizon scandal receiving the financial damages they deserve, after the Post Office CEO urged it to pay up.

Hundreds of subpostmasters had their lives destroyed after they were blamed and punished for accounting shortfalls, caused by the computer system they use. The Post Office strenuously denied this for two decades, until a damning High Court judgment in December 2019 meant it could no longer do so.

From the introduction of the Fujitsu Horizon software in 2000, subpostmasters suffered grave injustices after they were accused of financial crimes. Some were given prison sentences, many had to pay huge fines, others suffered ill health due to stress and depression, families were ruined, and at least one suicide is linked to the scandal. Between 2000 and 2013, 736 subpostmasters were prosecuted based on evidence from the flawed Horizon system.

A Computer Weekly investigation in 2009 told the stories of seven subpostmasters affected by the losses (see timeline below for our coverage of the scandal).

Before this, the Post Office, which is fully owned by the government, had told subpostmasters who had experienced unexplained shortfalls that they were the only ones. It was after Computer Weekly revealed what was happening that subpostmasters realised they were not alone, but among hundreds who were experiencing problems.

This led to the formation of the Justice For Subpostmasters Alliance (JFSA) by former subpostmaster Alan Bates and in 2018 a group of 555 subpostmasters, led by Bates, took on the Post Office in the High Court and won. They proved the computer system was causing shortfalls and the Post Office was forced to admit it was wrong.

But, despite a huge victory for subpostmasters over the Post Office in the High Court, which paved the way for the latter to change its ways, they have not been compensated adequately. These people cannot get their former lives back, but they could be compensated appropriately for what they have lost and suffered.

Since the 2019 High Court victory, when judge Peter Fraser lambasted the Post Office’s management practices and its denial that Horizon could be at fault, the Post Office set up a compensation scheme. About 2,400 subpostmasters have joined the scheme and taxpayers are paying for it after the government agreed to foot the bill. The cost is expected to be hundreds of millions of pounds and the Post Office cannot afford it.

But the 555 subpostmasters who took the Post Office to court and won are excluded from the scheme. They were awarded £57.75m in damages at the conclusion of the case, but were left with about £11m after legal expenses were paid. Taking on the financial might of a government-owned organisation meant subpostmasters had to borrow money from litigation funders to pay the high costs of the group litigation order, which has to be repaid with interest and is not paid for by the losing side.

During the two completed trials of four that were plannned, the Post Office, under the government’s watch, ramped up spending in the legal battle, and is estimated to have cost taxpayers over £100m.

Subpostmasters, MPs and members of the public are demanding that the government at least pay the legal costs and leave the claimants with more appropriate compensation. But, despite agreeing to provide aid to the Post Office and pay for the compensation scheme for subpostmasters who were not claimants in the High Court, it has refused to pay the costs of the claimants who brought the full extent of the scandal to light. The compensation scheme only exists because of the court victory of the 555 subpostmasters.

In its refusal to properly compensate the claimants, the government is now finding itself isolated. In a speech to Post Office executives, Nick Read, who took over as CEO at a time when the organisation’s mistreatment of subpostmasters was being revealed in the High Court, said he understood the unfairness of the settlement.

In his recent speech, Read said “Although the parties entered into a full and final settlement of the group litigation in good faith, it has only become apparent through various news reports since, quite how much of the total appears to have been apportioned to the claimants’ lawyers and funders.

“Should those reports be accurate, it is at least understandable that the claimants in those proceedings should continue to feel a sense of injustice, even in circumstances where they also agreed the settlement in good faith.”

Up to the government

Read said it is up to the government to put the matter right. “What, if anything, can be done is not for the Post Office to determine or even within its gift,” he said.

He said the Post Office must accept that it has caused very deep pain for some subpostmasters and he is encouraging the government to compensate. Absent the possibility of turning the clock back, compensation appropriate to that pain must follow,” he said.

“I am urging government to work with us to find a way of ensuring that the funding needed for such compensation, along with the means to get it to those to whom it may become owed, is arranged as quickly and efficiently as possible.”

Computer Weekly asked the government, through the Department for Business, Energy and Industrial Strategy (BEIS), if it considers it fair that subpostmasters who brought the legal action against Post Office, and won, should pay their own legal costs.

We also asked: if it is fair that subpostmasters in the legal action receive less than subpostmasters who did not take part, despite the compensation scheme only existing due to their court victory?

BEIS was then asked if it would reconsider its refusal to pay the legal costs of the subpostmasters that took the action.

It did not answer these individual questions directly, but stuck to its previous statement that “the settlement reached in late 2019 was full and final, and the government cannot accept any further request for payment”.

Twenty years ago, one of the 555 claimants went to prison at the age of 19 and has lived with a criminal record ever since. She received £17,500 compensation. Another victim, who was also sent to prison and lost her livelihood, received just £8,000.

Bates at the JFSA said getting the government to pay costs would be a starting point. “Why is the government failing to understand that it is responsible for the £46m the 555 had to pay after all the comment in the media about the costs?” he said. “The evidence is there and in our complaint to the Ombudsman, yet the government’s attitude continues to be punitive towards the 555.

“They obviously know they are liable for the costs and compensation as they are using taxpayers’ money to pay the Post Office’s costs and the compensation in its historic shortfall scheme.

“Neither the Post Office historic shortfalls compensation scheme, nor the unearthing of all the miscarriages of justice the Post Office is responsible for, would have seen the light of day without the 555 victims taking the Post Office to court.”

Paul Marshall, a barrister at Cornerstone Barristers, has worked on the cases of subpostmasters who were sent to prison based on flawed evidence. He said claimants who had received criminal records were barred as part of the settlement in the High Court, with other claimants giving up some of their compensation to pay them.

“It is easy to forget that it was an express term of the settlement of the group litigation, settled in December 2019, that it was expressly agreed that claimants in that litigation with criminal convictions were not paid, as part of that settlement, anything at all by the Post Office,” he said.

“Convicted postmasters gave up all their claims in settlement of that litigation except a right to claim against the Post Office malicious prosecution – which may now be causing the Post Office concern, given what has emerged.”

Court of Appeal hearing

On Friday 23 April, 42 subpostmasters will attend the Court of Appeal to hear whether the criminal prosecutions they received at the hands of the Post Office, for crimes including theft and false accounting, will be quashed. Six subpostmasters, who were originally prosecuted in magistrates’ courts, had their convictions quashed in December. All the cases were referred for appeal by the Criminal Cases Review Commission in its biggest-ever group referral.

Marshall said he expects costs to increase after the Court of Appeal’s judgments, which are expected to quash an unprecedented number of convictions. 

Conservative peer James Arbuthnot, who has campaigned ­­for justice for subpostmasters for many years, said it is time for the government to “do what is right” and properly compensate all affected subpostmasters.

“Nick Read, as CEO, recognises that the only way in which the Post Office can move on from the dreadful Horizon saga is for the people who have been so badly wronged to be properly compensated,” said Arbuthnot. “He also recognises that the government, as owner of the Post Office, is the only body that can authorise this.  Both of these points are important statements by a key figure in this story, and I welcome them.”

He said the government “knows he [Read] is right”, adding: “If it fails to back him, there is no chance that, at some stage in the future, it will be able to sell the Post Office as a going concern. The Post Office would be forever tarnished by its awful reputation, and no private sector organisation would touch it.  So now is the time for the government to recognise the value of doing what is right – as Nick Read, to his credit, has just done.”

Cornerstone’s Marshall agreed that the government should pick up the tab “because it either knew, which makes it complicit, or did not know, in which case its management of the Post Office was, on the face of it, negligent”.

He said that as the Post Office is government-owned, UK Government Investments (UKGI) has a director on the Post Office’s main board who sits on the committee that identifies and manages risk.  

“To date, little has been said about failure in corporate governance by the Post Office,” said Marshall. “But the reality, as is apparent from the recent acknowledgement by the Post Office that it cannot afford to pay the compensation under its historic shortfall scheme and the requirement for the government to underwrite and bail out the scheme, is that the Horizon debacle has caused the Post Office to fail as a corporate enterprise.” 

Marshall said there are still many questions about who knew what and when. “It just seems that the board, by its failures, has caused these massive contingent liabilities to be incurred,” he said. “The government, having chosen to conduct its business in this way, should carry the can.

“Otherwise, as Nick Read has noted, there will be an abiding sense of burning injustice on the part of former postmasters who joined in the civil litigation and who will have been prejudiced in having done so and who, as a result, are now excluded from claiming compensation under the historic shortfall scheme.

“No one can pretend that, but for the massive civil litigation, any of this would have seen the light of day.”

Timeline of the Post Office Horizon case since Computer Weekly first reported on it in 2009

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