POL and the Money Tree

With £3 million already spent at the 31st March 2018 on defending the current Group Litigation Order trial brought by the Justice for Subpostmaster Alliance (JFSA), Post Office Ltd (POL) are looking at significant legal costs as they attempt to delay the trial in one way or another.   The absurd recusal application alone cost them £500k.   Now they say they are definitely going to appeal the decision of the court in the first trial which is a ‘double down’ on what they have already spent on that to date.

I am not entirely sure of the sequence of events as far as legal costs go but the recusal hearing gave some insight into the process when the JFSA QC claimed costs, the POL QC objected to the amount they were claiming and that will result in a case management hearing to determine how much POL pay JFSA.   In much the same way, the costs for the first trial in the series will be settled except in this case POL actually won a few points so some of the costs will be to the account of JFSA.   Of course then there will be an appeal and I would assume at that time the JFSA may concede the points POL won from the start so ALL the costs will fall to POL for that one when they lose again.

It is pretty much clear cut that POL will lose the Horizon trial as well and there is no doubt that they will appeal that one, they have to otherwise the consequences of losing must take place immediately and again the costs become payable fairly soon after the decision is published.  A much longer trial and considerable background detective work went into this one by the JFSA so the costs will be far higher.   By the end of the year the whole process will have repeated itself in the Breach and Causation trial and I am as confident as I can be that POL will lose that one completely.

The end of POL’s financial year is 31st March so costs to date will be reported on when they publish their accounts in September and they will then certainly have to advise a contingent amount for the appeal process.   In fact they may even have to start considering the possible total liability they face should they complete the quadruple and lose all four trials, something I would definitely not bet against.

So stab in the dark time, how much is this all going to cost in total?   I sat in the trial for a couple of days and there were 20 or so highly paid legal professionals attending, plus the back office staff plus the court costs.   I am going for £100 million by the time it is all over and let’s say £80m of that is to POL’s account.    If that is the case then that means POL lost and the JFSA claimants have won so it won’t just be the legal fees they are paying it will be the quantum of those claims as decided by the Judge.    These will be huge and include compensation for wrongful imprisonment which if it had been carried out by the Crown Prosecution Service would have been limited to £500k.  As Post Office Ltd carried out the prosecution as a private company then there is no maximum amount of compensation.   (that is my opinion and not necessarily a legal fact!)

My guess is that the total claim will be in excess of £500m plus the legal costs of £80m – let’s just round it up to £600m

The big problem for POL is that they have no access to that sort of cash.   A bigger problem for POL and the Government is that from a political perspective POL cannot go bust so they need to raise that money in some way and in fact at some point in the near future they (the Government and POL) are going to have to comment on where they expect to raise the capital required should the very likely happen and they lose the cases.   It is not just POL, POL’s auditor’s will have to express a view  on the viability of the business as a going concern if a source of funds is not available to meet the company’s legal penalties.

There is a further conundrum in the fact that POL’s hands are very much tied by their articles of association.   While these articles allow them to spend up to £50m without approval from the Secretary of State (SoS) which would allow them to pay the legal fees, they also prevent POL from borrowing any amount in excess of £75m without the SoS permission whether that amount is to be borrowed from the Government or not.  So the SoS has the power to prevent POL paying the claimants their dues.  Perhaps it is time for the SoS to make it clear that when the JFSA win the SoS will not use their power to stop POL raising the funds necessary to pay off the claimants.   In any event it would be an extraordinary act of political suicide to cast POL into the insolvency courts because the government withdraws support not only from POL but from the claimants whose suffering the government were as guilty of as POL. (just re-read the above and to make it perfectly clear – when the JFSA win it is the Secretary of State who will make the decision directly or indirectly whether or not to pay the claimants .  Secretary of States come and go as do parties forming governments so I am not sure they should remain in denial of the problem and put all questions to them asked in the house about the matter back to POL or refused due to sub judice)

POL as we know remain unaccountable to nearly everyone, except now the JFSA who are truly holding them to account so I imagine they think they can get away with misusing the funds they have at their disposal in order to settle this.  I did say they didn’t have any and legally they don’t but that has not stopped them in the past from making use of government funding they are not entitled to.  In this trial alone they have already had to repay the government funds they misused.

POL remain bound by EU State Aid rules, at least for 2 years after Brexit if it ever happens.  They are prevented from using the Working Capital Loan provided by BEIS for anything other than financing the level of cash they require to keep in the network.  I have caught them out before with misusing this and if they try it again I will see it.

They could try and tell us that the source of funds was the working capital in the business less the BEIS loan but they can’t utilise that either because the conditions of the BEIS loan state clearly that BEIS retain a lien over the working capital as security against the loan.   It all gets a bit incestuous I know but rules are rules and conditions must be met.

Any business can always try and leverage their cash flow in a way to free up cash to pay off liabilities.  By extending the time they take to pay creditors and reducing the time they allow debtors to pay them could solve their problems if they hadn’t already gone down that road.  I am pretty sure the government is keen to see small businesses being paid quickly by their departments so it is something of a surprise to see that in the last financial report from POL in 2018 their creditors were owed twice as much as their debtors.  There is no more meat on that particular bone of capital to pick from.

POL aren’t going to continue to make a profit for very much longer.  They only recently did for the first time in years but what they seem to forget is that they need subpostmasters to carry on making that profit for them and who in their right minds will be buying a post office in the light of the extraordinary disclosures that have already been made, are waiting to be made and are going to be repeated in the appeal court.   So raising debt to pay off the claimants will be problematic as again they are restricted by state aid rules and it remains to be seen whether or not Brexit happens if those state aid rules will continue to be enforced.

And then ….

When the court case is over and the claims settled there is more expenditure needed.   A fairly significant amount to put in place what I will call the replacement therapy.  Political expediency demands a post office network and a phoenix rising from the ashes of this burnt out mismanaged enterprise will be required.   Replacing the staff (OK some of them won’t get redundancy payments because they will be jailed) will be expensive and putting in place the systems and technology that should have been in place from the start will add to the cost.  However that is a reasonable expenditure for the Government to provide grant funding for under state aid rules but the government will also have to wake up to the realisation that subpostmasters will not work for less than the minimum wage and as a result a network of 11,500 offices will always require financial support.

And Oh! … how the government would wish that that was the end of it all.  But no there is more.  The CWU are bringing POL before an employment tribunal with the awarding of worker’s rights to subpostmasters almost certain.   Holiday pay, sick pay, maternity leave, workplace pensions all going to have to be paid for.

And just like those ads you see on TV .. but wait there is more .. this trial is only the first round .. there are far more claimants being added every day.  When I attended the trial in London I was surprised to meet several ex subpostmasters who had come along to find out what it was all about and who had never heard of the JFSA.  The publicity hasn’t really started and most shamefully the position of POL has not changed one bit and they haven’t even informed the network of the errors that were in the system let alone the ones they know are current.   Kimberley diamond mine is not the biggest hole in the world….

Need I say all this could have been avoided?  If they had done it properly from the start?  If they had listened to the people like Alan Bates there would have been no claimants to bring a court case in the first place.   Does the government really want to entrust the very people who are continuing to deny there is a problem even after two highly respected judges have found against them so far, to sort this mess out?

When we add it all up it is beginning  to look a lot like a billion (there’s a song in there but I’ll leave that til Xmas) So will somebody please tell me and the rest of the world how on earth POL intend to pay for it all?  I think this question must be the last remaining concern for the JFSA team as they stride towards total victory in the courts.

As ever, grateful thanks to Nick Wallis (www.postofficetrial.com) for his coverage as well as Karl Flinders at Computer Weekly and Tony Collins at https://ukcampaign4change.com/ whose latest blog post looks at this very question of where is the money going to come from.

6 thoughts on “POL and the Money Tree

  1. Brilliant piece and lots of food for thought?? As a claimant it’s weird to talk like this as there is a slight whisper of all this coming to an end. Now that is unbelievable and hard to get my head around🙃 As for the finances, well ours was dissolved without a second thought including our businesses and livelihoods so POL are just gonna have to do whatever it takes!!! Mind they got to get real first!


  2. Enjoyed reading the article Tim, IMO POL have started recouping money wherever they can already, last week we were issued a notice that our cash return to the cash centre was £20 short despite us having 2 staff counting and using our POL approved cash counter. So I put a straw poll up on facebook, how many people have had shortage notices in the last 4 weeks? 51 replied and 1100 viewed the post, so 51 people who’s job it is to count money, most double checking it, many using cash counters had shortages. That’s just shy of 5% of the people reading the post. Lets say the average was £30 shortage as some were much bigger. That times 51 replies is £1530, multiply that by 13 lots of 4 weeks in a year which is £19890, multiply that by the remaining 90% of the estate and you could argue a figure of £179,010 . I suspect the figure may be higher as some people were reporting hundreds being lost. I was unable to dispute my alleged shortage as it had to be done by phone and they didn’t answer so it will have to be the small claims court for me.


  3. Enjoyed reading the article. However, to clear up one point, POL won’t have to pay any compensation for wrongful imprisonment. Compensation for miscarriages of justice is always paid by the Crown regardless of the prosecuting authority. Compensation is therefore subject to the limit of £500k per person. Also, under current rules, subpostmasters will only receive compensation if they can prove their innocence. It is not enough that the courts have found them not guilty (assuming that happens).

    A subpostmaster who has been wrongfully imprisoned may have a claim for malicious prosecution but that is not clear. However, the fact that POL appear to have wilfully failed to comply with the law on disclosure of evidence certainly won’t help them.


    • Thanks Peter – I didn’t know that although I was aware that there is no statutory compensation. I do think malicious prosecution will be easily proven for reasons that I think will become obvious in the next trial. Cheers, Tim


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