So somebody (name withheld but you know who you are Jon Banks) on Twitter has asked my thoughts on why Post Office Ltd (POL) continue to pursue their defence of the legal action brought against them by the Justice for Subpostmaster Alliance (JFSA)
It is extremely difficult to answer that one given that their decision to do so must be reviewed fairly regularly – or so you would have thought given the revelations in court and now the judicial decisions mounting up against them.
As was revealed by Lord Grabiner in the recusal application, this is a board level decision the members of whom are now well and truly enmeshed in the outcome of these proceedings. The first factor to take into account, in no particular order, then is the damage to the board member’s personal reputation which is at stake. To lose now, from this point onwards, will be particularly damaging to them because this is no ordinary company whose reputation and very existence (not my words, their own) is at stake, this is THE Post Office. The darling of the High St, the bastion of the community and the butt of all jokes to do with queues. If this goes against the board’s decision to proceed then the media will have a frenzy and the blame will be laid firmly at the board’s door. They have repeatedly stated in their annual accounts that the claim has no merit so it will be particularly interesting to hear what they have to say in this year’s accounts given that they have now lost the first two major decisions in the trial and will bear the majority of the costs of the claimants for these.
The second factor to consider is from the opening statement of the first trial where the Post Office legal team decided to inform the court that an unsatisfactory result will cause an existential risk to the company. Leaving aside the fact that that statement is of absolutely no relevance to the ultimate decision of the court other than a fairly obvious attempt to bias the judge in their favour (which he rightly ignored) it is a significant factor in deciding whether or not to continue defending the claim. POL however, have not expanded on the rationale behind that statement nor whether all or just part of the business is at risk. Certainly the way they do business in the future, in particular the relationship between POL and their subpostmasters, must now change as a result of the first decision. The fact that they haven’t yet started on this process may be down to a possible appeal but it remains to be seen whether the practicalities of implementing these changes form part of the existential risk i.e. the business model they currently use is not capable of supporting the new regime required.
Next the big question about the source of funding which has to be a consideration when continuing this defence. The longer the trial goes on the costs mount up as does, in my opinion, the likelihood of them losing and paying out a multi million pound settlement. Justice should never be able to be bought but POL appear to be playing the bottomless pit card against the claimants forcing them to consider first whether the prospect of ultimate victory is worth the cost of the action. In playing this card though they need now to explain where this money is likely to come from.
POL appear to be playing with fire here, because the final quantum of the claims has yet to be determined. I am sure they will have a figure in mind but with 500 claimants and at least one we know of from the transcript of the first trial claiming close to £1 million (richly deserved in my opinion and probably should be double) then we are talking 9 figures at least. Now the government may own POL but because of state aid rules (Brexit does not come into it) they are restricted not only in how much support they can give but also what that financial support can be spent on. Already we have seen that POL have taken liberties with grant funding from UKGI and have had to repay £3m they used to fund the litigation to date. I will be keeping an eye out in their accounts to see where they are sourcing the funds and I can warn them now that using the BEIS Working Capital Loan is a complete no no – I got them the last time they misused that loan and I will do it again if they try the same thing. So with government funding all but ruled out and a 9 figure sum in all likelihood required then their only source is debt. That debt would be at least subtly guaranteed by the government if not fully guaranteed and it would not be hard to raise in the capital markets, however that adds to the strain on cashflow and if expected profits fail to materialise then they sink in to a debt spiral.
Right from the very inception of Horizon back in 2000 POL and the NFSP have always gone to great lengths to protect the image of the brand by refusing to acknowledge that the Horizon system was not as reliable as made out. Evidence is everywhere supporting that fact and in hindsight they must now see that as a very naive mistake to have made because it potentially is leading to the brand disappearing altogether. Protecting the image of the post office as a trustworthy brand is still probably the most important factor in their determination to see this legal process through to the bitter end. It is well and truly misplaced judgement on their part fuelled by indoctrination of the theme over the years – protect the brand at all costs.
Next there is the distinct possibility that POL will actually win some of the decisions to come with respect to Breach of Contract and Causation. While these will, if they win any, be in the minority, it will reduce the overall claim and legal costs. Hard to tell at the moment as I have no knowledge of all the claims but it is another factor the board must consider when taking the decision to fight on or give up.
Finally though there comes the time when defeat will be certain in their eyes. Taking the claim all the way to the bitter end and through the appeal process is not only delaying the inevitable it is losing their last card to play with and that is negotiated settlement. That will bring with it a substantial discount and when you are talking of hundreds of millions substantial could mean close to a hundred million. That is also a factor for the government to keep an eye on as they must approve spending by POL over a certain amount and a settlement figure will certainly need their approval. The government could even insist on settlement as more and more details emerge from the trial with associated publicity and the likelihood of embrassment looming. Never forget the additional bonus of settlement is non disclosure either by contract or by the mere fact the legal process ends early.
(I keep forgetting to add the links to the journalists who continue to cover this fiasco)
Nick Wallis – without whose Tweeting we would be deaf – http://www.postofficetrial – drop a pound or two in his paypal jar please to keep him going.
Tony Collins – whose post this morning rings bells with the above – https://ukcampaign4change.com/2019/04/11/how-is-post-office-funding-increasing-costs-of-horizon-it-trial-mp-asks-questions/
Karl Flinders at Computer Weekly – also published this morning – https://www.computerweekly.com/news/2240089230/Bankruptcy-prosecution-and-disrupted-livelihoods-Postmasters-tell-their-story