This is the first of three hearings scheduled to take place over the coming year, centred around the accuracy of the Post Office's digital accounting system. In addition to the tragic personal stories behind the case, it raises interesting legal and procedural issues, and contains some important lessons for businesses.
The claimants are a group of sub-postmasters, each appointed by the defendant to run a particular branch of the Post Office and Crown Office employees, managers and assistants (who run smaller branches). The Post Office operates a network of over 11,000 Post Office branches throughout the UK.
In around 2000 the Post Office introduced a computerised accounting system called 'Horizon' in all of its branches. This system was designed, installed and managed by Fujitsu Service Limited. The system was upgraded to an internet based system called 'Horizon Online' in 2010 (collectively "Horizon"). All of the claimants were users of the Horizon system.
The Horizon system provided regular reports to the Post Office as to the status of the accounts for each branch, including whether the accounts were in deficit. The accuracy of these reports were challenged by those running the branches and the issues escalated to the extent that the Post Office alleged false accounting and theft, in some cases. The alleged impact of these allegations was dramatic and included prosecution, financial loss, personal injury and bankruptcy. Most notably Noel Thomas, a former sub-postmaster employed in Gaerwen on Anglesey, was jailed for nine months in 2006.
It is alleged by the claimants that the Horizon system changed the way that they could account for, interrogate and investigate, the numerous financial transactions that were made in the relevant branches every working day. A central part of the claimants’ case is that the Horizon system had a large number of software coding errors, bugs and defects. The claimants have gone as far as to suggest that a 'cover up' at the Post Office has taken place over the shortcomings in Horizon. The Post Office disputes all of the claims.
The claimants seek damages for their losses, including on the basis of misrepresentation, deceit, harassment, duress and malicious prosecution. In the current hearing, the court will hear evidence from the six lead claimants and 14 witnesses for the Post Office. The court will also address various contractual issues between the claimants and Post Office; these include breach of an implied term, the imposition of unfair, onerous or confusing contract terms and the unfair termination of contracts.
The two remaining hearings are set to take place in the new year. These will look at issues relevant to the operation of the Horizon system itself as well as the lead claimants’ individual cases.
The key legal issues in the current trial are:
• Implied terms; the claimants allege that certain terms should be implied into the contracts, including the provision of adequate training for Post Office employees, the provision of an accounting system that is reasonably fit for purpose and the obligation to investigate shortfalls in its accounts properly.
• Inequality in bargaining position between parties; the claimants argue that there was a serious relationship imbalance between the parties. This then led to the claimant accepting long term and expensive commitments with the Post Office – which exacerbated existing accounting failures.
• Vicarious liability of sub-postmasters for their agents; the claimants allege that the Post Office held them liable for the acts of their assistants but took no responsibility for the IT training.
The legal issues in the case are important, but they are likely to turn on their facts rather than break new ground. There are some useful lessons that businesses can learn, however:
• Difficulties in group litigation; this remains complex and expensive. From a claimant perspective there are the challenges of creating a group with sufficient commonality to proceed, and how to fund these claims. From a defendant perspective the costs can be significant, and the allegations wide ranging, across so many individuals and time periods.
• Challenges involved in large scale IT projects; this is the latest in a long line of cases where businesses have struggled to deliver complex IT projects.
• The impact of conduct in litigation; the court has been critical of the some of the conduct of the lawyers involved, suggesting it has impacted cost and progress. It is inevitable that in this kind of complex litigation lawyers will act robustly to protect and advance the interests of their clients. However, the press coverage of the case has focused negatively on this aspect - and this can matter from a public relations perspective.
Miles Robinson, a partner in the London dispute resolution group and Thomas Ajose, a trainee in the London dispute resolution group of law firm Mayer Brown