By Tony Collins
Directors of the publicly-owned Post Office have said that an adverse outcome of a High Court dispute with former subpostmasters over the Horizon IT system could have a material impact on the consolidated accounts.
The directors also say that £3m was spent on legal costs in 2017/18 and “we expect costs to be more significant in 2018/19 and 2019/20”.
Hundreds of owners of local post offices are taking part in a Group Litigation case against the Post Office. They say their lives and finances have been ruined by problems related to the performance of the Post Office’s Horizon accounting system.
The High Court case is to determine whether the Post Office was legally justified in taking the actions it did against the subpostmasters and whether the shortfalls shown on the Horizon system, for which subpostmasters were held personally liable, were genuine deficits or merely numbers generated by an unreliable system.
Three years ago the directors of the Post Office said in their annual report that the outcome of a High Court dispute with the former subpostmasters would not have a material adverse impact on the consolidated position of the Group.
This is from the Post Office’s 2015/16 annual report,
“A High Court claim has been issued on behalf of a number of postmasters against Post Office in relation to various legal, technical and operational matters. Full particulars of the claim (including as to quantum) have not yet been received by Post Office. The Directors do not consider the outcome of any current claim or action will have a material adverse impact on the consolidated position of the Group.”
The following year, the directors reported thatthey will “keep under review” whether the outcome of the case will have a material impact on the consolidated position of the Group.
The Directors do not currently consider, but continue to keep under review whether, the outcome of any current claim or action will have a material adverse impact on the consolidated position of the Group,” – Post Office 2016/17 annual report.
Last month, in their 2017/18 annual report, the directors of the Post Office said that an adverse outcome of the case “could be material” to the consolidated position of the Group.
While the Directors recognise that an adverse outcome could be material, they are currently unable to determine whether the outcome of these proceedings would have a material adverse impact on the consolidated position of the Group, and are unlikely to be able to do so until the Court has made further determinations and the Claimants have provided the necessary information about the value of their claims. The Directors continue to keep this under close review. In 2017/18 the costs of £3 million included in operating exceptional items relate to Post Office defending the Post Office Group Litigation. These have been disclosed as operating exceptional items because we expect costs to be more significant in 2018/19 and 2019/20.”
Comment:
Whether concerns about the dependability of Horizon were being raised by MPs, by BBC’s Panorama or by Second Sight, the forensic accountants the Post Office commissioned to look into subpostmaster complaints, the Post Office’s board has always stood by its decisions and actions.
Do Post Office directors believe that the legal issues matter more in the case than the lives of hundreds of people who used to work for them?
Some subpostmasters have been jailed or declared bankrupt. Some have sold their homes to cover the shortfalls shown on the Horizon system. Most have lost their livelihoods. Do their lives matter more than proving the legal grounds of decisions and actions taken?
It is not as if the decisions and actions of the directors are infallible. Judge Fraser, in a pre-trial ruling earlier this month, rejected some of the Post Office’s legal arguments.
The Post Office could lose the case. The judge could then order the Post Office (in other words taxpayers) to pay large sums in costs and compensation. As the directors recognise, an adverse outcome could have a material effect on the Post Office’s consolidated accounts.
It was the decision of the Post Office’s directors to, in effect, mount a High Court defence of their actions and the Horizon system. It was their decision to spend millions of pounds of public money on lawyers rather than on settling the dispute and paying compensation to the subpostmasters. It’s clear that the directors remain convinced that there is no merit in the subpostmasters’ case.
If the Post Office loses the case (and any subsequent appeals) will its directors be held accountable for their decisions?
If they decide now to settle the dispute, will they be held accountable for the millions of pounds of public money already spent on legal fees?
Whatever the outcome of the case, lawyers will have to be paid. With every week that goes by without a settlement, the legal costs are mounting. The amounts of public money at risk are increasing.
It is almost certain nobody in government will interfere with the Post Office’s decision to continue its defence of the subpostmasters’ actions. It is therefore the directors’ decision to continue to fight.
No doubt they are convinced their actions and decisions will be vindicated. But what if they are wrong? What will happen then? Who will be responsible for the millions of pounds of public money spent on a case that did not have to be fought?
If the current directors have left their jobs by the time of any appeals in 2020, will they still be held accountable if the Post Office loses?
Thank you to Tim McCormack, a former IT consultant and owner of local post offices in Scotland who has been a critic of the Horizon system and the Post Office’s actions aganst subpostmasters. He spotted what the Post Office was saying in its various annual reports about the High Court case and has written about it on his blog “Problems with POL [Post Office Limited)”.
Tim McCormack on Twitter: @Jusmasel2015
Nick Wallis’s blog on the High Court case
High Court Horizon IT case has cost £10m – and the trial has yet to start
Campaign4Change 
Another very pertinent article Tony. Every action has a reaction and legal actions are no exception despite not being associated with the laws of Physics. I think the Directors of POL both executive and independent should have a look over their shoulder as to the ultimate consequences of their actions. There may be significant losses incurred by Post Office in ultimately settling this claim. I would also add that quantifiable costs in settlement are one thing, but there is also damage to the brand to consider.
Cheers, Tim
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