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A Submission to the Post Office Enquiry

Post Office Limited: a 20-year and continuing failure of Corporate Governance and Directors' Duties.

PART 1 INTRODUCTION AND BACKGROUND I am a partner at Aria Grace Law. In various earlier matters relating to the “Post Office Scandal”, as the Enquiry knows, I have represented Seema Misra, Tracy Felstead and Janet Skinner. I have been advising clients on aspects of company law for many decades. I also write and provide seminars to UK companies, as well as overseas companies who do business in the UK on aspects of company law, including issues relating to directors’ duties and corporate governance. I have, for some time, wanted to write about the relevance, of the above topics to the Post Office Scandal. I am not sure how many other corporate lawyers are assisting victims of the Post Office Scandal. As I have explained previously, it may be that in my position I am able to bring a different perspective to various matters. I ought to make it clear, this is not intended in any sense to be a technical paper, as I am a self-professed ‘common sense deal doing’ lawyer. It is however intended to show, at a high level and in a relatively few pages, what I believe are some of the numerous failures by Post Office Limited(POL) directors around particularly corporate governance and section 172 Companies Act 2006 (directors’ duties) over several decades. There is a more detailed commentary on section 172 and the corporate code established by the Financial Reporting Council, towards the end of this paper. The paper is necessarily brief; it omits swathes of issues concerning the behaviour of the POL directors over the period mentioned. It attempts merely to suggests a pattern of failures which, at some stage, others might wish to investigate further. I also note that based on what I have encountered to date, this topic does not seem to have interested anyone in the academic world. Therefore, I decided to write something myself. I have had assistance from others; thank you to each of them. I wrote an initial paper in the summer of 2022 which I circulated to a limited group (although not, at that stage, to the Enquiry). This paper is an update. Nothing seems to have improved since my original paper; later, I will mention “BonusGate” (April 2023) as a clear example of a continuing failure of governance. Much of the core of company law, as written down, is a dry topic. It doesn’t seem to impact on real-life issues (except, perhaps, for shareholder disputes and similar). Generally, too, I don’t notice many corporate lawyers getting particularly excited about the rules around directors’ duties. However, I have seen the damage done to so many of those who were ruined by Post Office directors and senior management, aided, and abetted by others, including certain members of the legal profession, over 20 years.

I have seen how the lives of my three clients, Seema Misra, Tracy Felstead and Janet Skinner were destroyed and the years – the irrecoverable years/decades –lost to them and their families, and to so many others. As a rule, corporate lawyers tend not to assist in the destruction of people, their businesses and conceal or otherwise not disclose, key documents. One notable exception is perhaps noted in the case of Ocacdo v McKeeve [2022] EWHC 2079 (Ch) where the latter denied he had any knowledge of search orders and told the firm’s IT manger to “burn” the documents. But these examples are few and far between. However, POL (as I define it below), decided not to make available, various documents before, during and indeed after hundreds of trials, over many years, it is almost certain there were significant delays in overturning convictions which senior management in POL, and its lawyers (both internal and external), knew to be unsafe (as the convictions were based on untrue information/false evidence, used by the prosecution). In terms of the board of directors and individual executive directors, it needs to be established as to what they knew and when? A constant theme of this paper is that, if they didn’t know, why not and if they knew, why did they not act, and indeed if they decided not to act based on advice – what advice? The “not knowing / covering -up/ non-disclosure” has lasted for decades, for example in respect of the crucial Clarke Advice, buried until late in 2020. Indeed, the issue has been raised by the Enquiry itself. It would seem too that many senior figures improperly delegated or fettered their judgment to ‘professionals’, and it would appear that these professionals had one thing in mind, not to provide proper advice (which would in some cases involve advising that they are conflicted), but to see their retainers and engagements continue. A cynical view, or a view borne out by facts is for others to determine. Perhaps the Post Office was seen by many external firms and advisors as a recurring income stream. This was coupled with woefully unqualified long term mid-level managers who had no interest (and/or who did not have the skills) to question the system within which they were operating. We saw this in the testimony of Ms Helen Rose – the ‘auditor’ – who was clearly not an ‘auditor’, either by way of qualification, disposition, training, or mindset. My view of her testimony was that she had decided if something occurred outside of her remit, this was not her problem, and resulted in a ‘just following orders’ mentality. This mindset seemed to permeate throughout the entire operation, such that Horizon worked, we must find experts who said it worked, we must prosecute anyone who said it did not. Indeed, from the testimony of Ms Rose, it was clear that her role was to find security breaches and find loss, it did not account for the fact that loss might not have occurred. One wonders, even if there had existed a whistleblowing hotline at the Post Office, would anyone have used it, and would anyone have listened.

PART 2 SOME GENERAL COMMENTS When I refer to POL in this paper, I should make it clear I am referring to individuals. They include people such as Paula Vennells (ex-CEO between 2010 and 2019),Tim Parker (Chairman between 2015 and 2022), Alisdair Cameron(CFO of POL, also since 2015) and Ken McCall, (senior non-executive from 2016 until early 2022). Why are individual names important? Because it is easy to see “Post Office Limited” as a multi-billion-pound anonymous organisation. But those who ran Royal Mail, (later Post Office), were individuals, and individuals are responsible personally for their actions. Directors are at the front of the line for “responsibility”. Whether directors or senior executives they failed in their duties, as I will explain below. The latest duo to seemingly ignore various of the core matters I will be considering, are Nick Read (CEO) and Henry Staunton (chairman) of POL. Because this scandal goes back to the turn of the century, and this is a paper about corporate governance (among other things), I note some very high-profile City figures who had key roles in Royal Mail/POL, now have or had significant positions elsewhere. I suggest the failure of the board of directors of POL around the matters described, has become embedded in the culture of the Company. Did these failures start 10 years ago, 20 years ago or earlier? Tracy Felstead was wrongly convicted and wrongly jailed as a teenager in 2002. As has been noted before, while in Holloway prison, she saw another inmate hanging dead in a cell. This is not and can never be a “dry” topic, and we should not shy away from the emotion inherent in this exercise and this paper. Corporate governance and the duties of directors, or an inability to comply with them, wrecked lives and worse. Until 2013, when a reorganisation took place, Post Office was a part of Royal Mail. Therefore, it is not appropriate, at least from a legal point of view, to place all the ills around the Post Office Scandal at the doors of the people named above. There were some “big hitters” involved before and after the split. • Adam Crozier CEO of Royal Mail between 2003 and 2010) and, now chairman of BT plc. • Alan Cook MD of Post Office between 2006 and 2010) and (ex) chairman of LV. • Moya Greene CEO of Royal Mail between 2010 and 2018 (which included the Post Office until 2013). • Allan Leighton chairman of Royal Mail between 2001 and 2009 and a “serial” director. • Donald Brydon chairman of Royal Mail between 2009 and 2015. He then became chairman of the London Stock Exchange. • Alice Perkins chair of Post Office between 2011 and 2015. Companies House records show a total of more than 80 directors between 2000 and 2023. A list is appended to this paper. Perhaps some of the anger directed towards Paula Vennells (CEO of Post Office between 2010 and 2019) might perhaps be directed equally at others. That is not in any way to absolve her in any way from the destruction she helped to continue during her time as CEO and her lack of integrity and ethical behaviour (however she chose to “spin” the facts; not the only member of POL boards to do so).

While Adam Crozier was CEO, there were more than 100 prosecutions of sub postmasters and during the time of Moya Greene more than 70 such prosecutions. A Freedom of Information Request does not show specifically how many are Horizon related. If the totals of prosecutions of sub postmasters and assistants are added up during Adam Crozier’s time as CEO, the figure could be in excess of 250. Below is a passage from POL Annual Report for 2013, written, presumably, without a hint of irony: “Good progress was made during 2012-13 in the complex process of separating the two organisations – so much so that the transition to date has been remarkably smooth without any loss of service or impact on standards” [my emphasis]. Lawyers Where I refer to lawyers, I am referring to unnamed but personally regulated individuals, both solicitors and barristers. Individuals, not entire organisations, did appalling things and in many cases, the results of their actions was the destruction of lives. It would be facile to think that within POL, Fujitsu, or relevant law firms such as (Womble) Bond Dickinson or Cartwright King, more than a small number knew what was happening. But some people did know. Some lawyers did nothing to justify their positions as Officers of the Court. Who advised the board of POL (if indeed anyone did so) will no doubt be a question for the Enquiry. What happens after the Enquiry ends should be of key concern for the legal profession and its regulators. It is hoped that, at the very least, a new practice direction applicable to both in-house and external lawyers is developed, to ensure that, i.e., in the case of the Clarke advice, lawyers owe a clear obligation to disclose directly relevant material – regardless of the views of their client. The Law Society remains virtually silent, despite much prompting by the author of this paper and several others to speak out. The Solicitors Regulatory Authority has apparently determined it cannot (will not) do anything more than continue to follow the Enquiry. No one should need reminding about the evidence given by several lawyers during recent weeks. POL prosecuted sub-postmasters over many years, basing its actions on information from the Horizon system; it defended its actions both through in-house lawyers and through retained law firms.

A General Discussion In a key High Court judgment, it was said that POL’s approach to some of the evidence in the trial: . . . demonstrates a simple institutional obstinacy or refusal to consider any possible alternatives to their view of Horizon, which was maintained regardless of the weight of factual evidence to the contrary. That approach by the Post Office was continued, even though now there is also considerable expert evidence to the contrary as well (and much of it agreed expert evidence on the existence of numerous bugs). . . this approach by the Post Office has amounted, in reality, to bare assertions and denials that ignore what has actually occurred, at

least so far as the witnesses called before me in the Horizon Issues trial are concerned. It amounts to the 21st century equivalent of maintaining that the earth is flat.” [Mr Justice Fraser, Horizon judgment, December 2019]. As noted through this paper, the board of directors of a company is responsible for setting its goals and its strategy. That is a point of significance when discussing directors’ duties. In settling the High Court cases around Horizon, POL “apologised” to those affected, committed to applying the lessons it had learnt and said it was undertaking an ambitious and sustained programme of changes. The Post Office says it has since made various changes to improve relationships with postmasters, and it is: “. . . undertaking wholesale reform with a programme of improvements to overhaul culture, practices and operating procedures throughout every part of the Post Office to forge an open and transparent relationship with postmasters. Two current postmasters joined the Post Office board as Non-Executive Directors to influence Post Office strategy and the implementation of programmes affecting postmasters. Comprehensive improvements have been made from initial recruitment and training through to daily transaction accounting, including design changes made to transactions on the Horizon system, based on postmaster feedback.” However, perhaps more realistically, the final lines of Nick Wallis’ book, The Great Post Office Scandal, contain these words: Proper redress for all the victims of this scandal is essential.” He goes on to say: “As for any individual being formally censured or punished for their role in causing, perpetrating, or trying to cover up, the Great Post Office Scandal, well . . . I’m not going to hold my breath.” So far as financial redress is concerned, it has been made clearPOL is, if not actually insolvent, unable to pay the compensation it owes to many hundreds of sub postmasters. By way of further background regarding POL, these next paragraphs are from a Research Briefing by Harriet Clark, Lorna Booth (18 October 2021, House of Commons). Government classification: As a public corporation, the POL board retains responsibility for the operations of the Post Office. Neither the sole shareholder nor the shareholder’s representative have any involvement in the day-to-day operations of POL or in the management of its network of post offices and staff. Whilst the POL board retains operational control, it is accountable to the shareholder for the performance of POL and is required to seek consent for certain matters, as set out in the articles [of association]. Relationship with government: The Post Office is owned by the government, through the Department for Business, Energy and Industrial Strategy – [now renamed The Department for Business and Trade] (BEIS)]and UK Government Investments (UKGI), however, the POL board has responsibility for the operations of the Post Office. In their Spending Review for 2021/22, the government announced that the £50 million

Network Subsidy Payment would continue, along with a further investment of £177 million, some of which was as a loan.” Below is an extract from a document published in March 2020: Post Office Framework Shareholder Relationship document. The date is important, coming only three months after two key judgments given against POL (in December 2019) but before any of the dozens of appeals against convictions were heard, beginning in late 2020. As we also now know, it was before key documents – including the Clarke Advice, the Shredding Advice, and the Swift Review – were uncovered, having been previously concealed for years by people working in or with POL. Governance and accountability 2. Overall aims 2.1 POL’s public ownership is founded on its SocialPurpose, as amended by the Shareholder (with the consent of POL), from time to time. POL’s current agreed Social Purpose is as follows: “The Post Office is unique: a commercial business set apart by its public purpose. We believe in the importance of connecting communities and enhancing the powerful role they play in all our lives. We will stay true to this commitment by meeting customer needs through our unrivalled local presence across the UK. This statement is underpinned by a set of principles and pledges. To deliver our purpose POL run our organisation by following four principles: • Keep customers at the heart of everything we do • Build relationships based on trust • Treat everybody with fairness and honesty • Make a positive social and economic contribution to all the communities in which we work As an organisation POL pledge to: • Maintain ethical attitudes in our behaviours • Invest in the organisation to secure the business for the future • Listen with care to the views of customers, colleagues and others with an interest in the Post Office, and support their development”. [My emphases]. As one of my clients wrote in her statement for the Inquiry: “People need to be held to account for the failings over the past two decades. The Post Office has said it is sorry for “historical failings”. This may be yesterday’s history for them, but this will be a part of me for the rest of my days, this is a life sentence.” I will set out some of the questions she has raised over many months, paraphrasing where necessary, and add some of my own. 1. “Why and how are the Chairman, CFO and senior non-executive director of POL still in place? Their corporate brand is trashed and POL, if not technically insolvent has had to run to HM Treasury to pay what will be hundreds of millions of pounds of compensation.” We now know that the Chairman-Tim Parker, seven years in the role, left in the Autumn of 2022. However, and as some would suggest, surprisingly, he was able to resign, rather than being removed by the sole shareholder as is permissible under section 168 Companies Act 2006. He remained chairman of His Majesty’s Court and Tribunal Service until December 2022, which does seem like a conflict considering the Court of Appeal found that the Post Office committed an abuse of process against the court [unconscionable/affront to justice/limb2]. I struggle to understand how even the most basic concepts around corporate governance allowed this. Additionally, Alasdair Cameron, CFO, remains in role after seven years. Yet, any half-competent CFO would be conscious of the alarming rise in external legal spend, the statistical improbability of 700 rogue small business owners, and the so-called ‘theft’ of money which did not exist in the first place. These two examples alone show much that remains wrong with corporate governance in the context of the POL. 2. “Having responsibility for over 11,500 offices and then ending up as the back end of the UK’s biggest miscarriage of justice, they’ve got away with it, like so many others, since about 2000. Some lawyers apparently even boasted about what they did to us.” I believe the reference here could be to a current litigation partner at (Womble) Bond Dickinson, Mr Steven Dilly, who allegedly boasted about how he could ruin the life of sub postmaster, Lee Castleton. This has been aired recently in witness testimony. However, for the purposes of this paper, the question might be: “was this part of his instructions or was he on a “frolic of his own”. Corporate governance does not focus on ruining lives. What was the involvement of the board and its then CEO Adam Crozier and chairman Allan Leighton, when Mr Castleton was taken to court and made bankrupt in 2007? Who made the decision? Would director sign-off have been required for a £300,000, or more external legal spend to recover a debt of less than £30,000? The importance of the Castleton case (his life and that of his family, destroyed) and the case ofMrs Seema Misra (jailed in 2010 when eight weeks pregnant and taken from the Court in handcuffs) in the overall strategy to defend Horizon, cannot be under-estimated. Who was making those crucially important case management (and also the much wider) decisions which had and were to have long term implications for the entire Horizon defence strategy? Ultimately, yet again, responsibility rested with the board.

3. One of the reasons I am doing this is to make sure the Post Office Scandal stays in the spotlight. It would not have happened if POL, Fujitsu and some of the lawyers involved hadn’t lied, and covered up key documents for so long and then (even at the end of 2020), tried to have Paul Marshall and Flora Page – kicked off the Appeals.” Why would that have been? Concerned perhaps by the “Clarke Advice” and the “Shredding Advice”, coming to light? Discrediting them for uncovering POL cover-ups and worse, hardly sits well with the POL statement set out above. Who was giving the orders and who was obeying them? For example, was a decision to force out Marshall and Page, discussed at a POL directors’ meeting? Or did it come direct from a Minister or senior civil servants? A cover up of key facts and key information which knowingly left people as convicted criminals for years, hardly sit well with concepts of corporate governance. Such behaviour should form no part of the duties of directors, individually, or as a board. 4. More recently a Freedom ofInformation request revealed that another key document, produced for, the POL Chairman by Sir John Swift (the Swift Review) was not disclosed to the board, apparently following discussions between the then recently-appointed chairman – Tim Parker – and the then General Counsel – Jane MacLeod. The reasons are set out in an excellent article by the indefatigable PaulMarshall: a-bit-worse. One quote from Mr Marshall’s piece. “The idea that a document of fundamental strategic importance was kept from the Post Office board, that as a result blundered on in its massively expensive and ill- conceived (possibly worse) litigation, defending claims on the basis that Horizon was ‘reliable and robust’, raises seriously troubling questions about what should not laughingly be called ‘corporate governance’. (One is bound to wonder whether there might have been other considerations in play.) The government appears to have given consideration in 2020, following the litigation debacle, to whether Mr Parker should be sacked for keeping the review from the board. It seems to have concluded that that might be a bit harsh. I wonder.” A bit harsh”? Mr Parker was still in place at the end of August 2022. However, POL, through some of its directors, CEOs, senior executives, and some of its internal and external lawyers did some terrible things to hundreds of people including my (our) clients during his time as Chairman. I know only a small amount of what they have been through over a combined total of more than 45 years of distress. This was caused by individuals unwilling to comply with basic concepts of directors’ duties. So, “a bit harsh”, I suggest not.


LIMB 2 POL accepted that it wrongly prosecuted sub-postmasters on the grounds that the computer evidence used in prosecutions was potentially unreliable (“Limb 1”). Janet Skinner, Tracy Felstead and Seema Misra (no-one else) and their (then) legal team Paul Marshall and Flora Page, and I/ Aria Grace Law, pushed for an additional limb, which was accepted by the court as an arguable ground for appeal. “Limb 2”, as it is known, meant the Post Office knew it was not possible for sub-postmasters to have a fair trial but prosecuted them anyway, which was, as the Court of Appeal said in its judgment, “an affront to the conscience of the court”. In effect, this is conduct that undermines the criminal justice system or public confidence in it. That “affront to the conscience of the Court”, I suggest, falls squarely on the directors of POL. Another failure of statutory duties (over how many years?) by numerous directors Corporate governance / directors’ duties (as I noted at the start) are far too often dismissed as having any no relevance to real lives and real deaths. The behaviour of the boards of Post Office over the years, disproves, completely, that comment, which needs to be repeated.

PART 4 COMPANIES ACT 2006 – SECTION 172 The Companies Act 2006 (the Act) codified certain common law and equitable duties of directors for the first time. In addition, POL, as a separate legal entity, is subject to statutory controls and its directors are responsible for ensuring that it complies with such statutory controls. Section 172 of the Act mandates: “Duty to promote the success of the company. A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company.” This is one of the most analysed and written about sections of the Act. It is inconceivable the directors of a major (state-owned) organisation and its advisors were not aware of it and its implications. If they were not aware, they should not have been/ should not be, directors. I struggle to understand how the Board could have considered properly paragraphs (a), (d), and particularly (e), when it was thinking about promoting the success of the company for its sole member. The reputation of POL, once seen as a leading trusted brand, has been destroyed (trashed), and was quite probably in the process of being destroyed over more than a decade before 2019. Ironic in the extreme as it is understood that having seen the Horizon failures as an” existential issue “for POL. The Company – which again I consider meaning individuals within the Company-- embarked on a course which destroyed its brand, utterly. The following questions must be asked, did: (i) no director understand the implications of the Post Office Scandal over some 20 years; and/or

(ii) no director during that period think it was a resigning matter and/or; (iii) no director know (enough/anything) about it and/or; (iv) each directors think the law, whether section 172 or other parts of company law, apply only to other directors of other companies. Where there elements of Nelsonian or reckless blindness at play? During years of the Post Office Scandal, numerous coaches and horses were driven through what most companies, and their boards, tend to take extremely seriously. That seems odd, bearing in mind the composition of the board, over many years. As noted, the names of all the directors and the company secretaries of Royal Mail and Post Office since 2000 are attached to this paper. I noted too that some of the most senior members of the POL Board have gone on to take further top roles in other well-known UK organisations as noted above. These are ‘City’ individuals imbued with institutional cachet, perhaps they wished to be seen as doing anything and everything to protect the Company; turning rouge in a 'board room bust up’ and revealing institutional corruption is unlikely to get one another appointment. It is a question that should be asked. As a result of the “smell test “mentioned at the end of this paper, I believe any POL Board member still in place today, should have resigned no later than 24 April 2021, the day after 39 sub-postmasters had their convictions overturned. Perhaps someone would ask those directors a few questions, including – “Why didn’t you?” In many ways, none of this is particularly complicated. Certainly, not if you sit where 736 wrongly prosecuted sub postmasters are sitting. Did the Board, at any time, ever seek specific legal advice on the application and relevance of section 172 over the years of the Post Office Scandal, from 2006 when the section came into force? Janet Skinner was wrongly prosecuted, convicted and jailed in 2006; Seema Misra in 2010 and Tracey Felstead many years before, in 2001. Had the Board considered and understood, and its relevant advisors explained, its responsibilities under section 172, and properly adhered to them (never mind a basic ethical responsibility and the integrity to “do the right thing”) those convictions might have been overturned soon afterwards – and not many years later. Our three clients waited 44 years in aggregate for their wrongful convictions to be overturned. The number of years perhaps bears repeating, 44. It is also worth bearing in mind that many feel it is unlikely that the Crown Prosecution Service would have even prosecuted (many / most of) these cases. POL did not apply (it did not have to) the public interest test – it had its’ own internal prosecutions department (or outsourced parts of it). As has rightly been asked, who benefited from these prosecutions? Certainly, when taking various key decisions, the implications of section 172 should have been explained to the Board and its committees. Were they? The Post Office/Royal Mail owned thousands of “corner-shops”, but it was meant to be a big and a grown-up organisation. POL retained various law firms during the years of the Post Office Scandal, in particular Womble Bond Dickinson (as it now is) and Cartwright King. Its primary law firm advising throughout the last few years of the Scandal has been Herbert Smith Freehills. It may be that none of the external law firms was ever asked to provide any such advice about laws applicable to directors. In that case, we can and should wonder whether the various general counsel of POL, including working backwards from nowBen Foat, Jane MacLeod, Chris Aujard and Susan Creighton (to name four), might have been asked to adviseon the law and practice around these subjects. If not, why weren’t they pro-active in speaking to the Board? Or perhaps those lawyers were pro-active but were ignored? I have spent a little time discussing section 172, because in almost every transaction I have been involved with during the last 17 years – since the Act came into force relevant company board minutes always mention it, specifically. Such important decisions as were made over and over again by the POL board would (I suggest) have required detailed legal input and advice and “of course” paper trails. This is brought right up to date by a comment relating to “BonusGate”, of which more below. Lack of written evidence of decisions taken, was one damning comment. And with senior City figures (and indeed, various senior civil servants) on the board, why would the Board of POL have been any different to other major (and not so major) company and not kept detailed records of actions and decisions? That may now be a rhetorical question, knowing what we have discovered about the way POL managed its affairs over many years. Would it have been too much to expect most POL directors to have understood that company law is not “just for others.” As noted, directors are required to promote the success of the company “for the benefit of its members as a whole.” Others have pointed out the complexities of POL ownership, which allows a near perfect “pass the blame” game The sole owner of POL is BEIS. Ironically, BEIS is responsible for the oversight of UK company law, and a state-owned organisation which has failed (or, more accurately, its directors have failed) to comply with the terms of section 172. There is of course an inherent conflict here, the POL is now technically insolvent (it does not and will not have enough money to cover Post Office Scandal liabilities), the Insolvency Service (part of BEIS) could bring proceedings against the directors for breach of section 172 – however I cannot see BEIS permitting that to happen, especially as seniorBEIS civil servants sit on the board of POL. What in turn might this tell us about the role of the sole shareholder in these very specific circumstances? That it / its nominated directors were just as “careful” as the rest about not knowing, or seeking advice about, company law. Or, yet again, deciding this government owned company was above the law? Section 167 of the Act gives a clear and simple route to remove one or more directors of a UK company by way of an ordinary resolution of shareholders - one piece of paper. Did the sole shareholder decide to look the other way as POL continued to do as it did, year after year. Or did the fact that BEIS / its nominated director, do nothing, give confidence and comfort to the other directors that their course of action had ministerial support? It is well known that Fujitsu, the architect of Horizon, is indelibly intertwined in other government computing contracts. Admitting that one of the largest contracts suffered from fatal flaws would have been an unmitigated disaster. Indeed, even after the scandal broke,

Fujitsu has continued to be awarded large government contracts despite employees being subject to continuing criminal investigation. The very, very latest time that the shareholder knew POL had gone (to use a simple word) “rogue”, was immediately after Mr Justice Fraser delivered his judgment in December 2019. Yet even then the sole shareholder did not take any steps to remove one director. Not Tim Parker, then in the Chairman’s role since 2016; not Alasdair Cameron, in his role as CFO for a similar time; not Ken McColl, its own appointee. Perhaps removing a director would be seen as admitting wrongdoing. PART 5 “BONUSGATE—DIRECTORS’ DUTIES AND GOVERNANCE Since preparing an initial draft of this paper last year, it has required some updating but unfortunately not due to POL making amends. One (further) failure of the Post Office board is around what is loosely called “BonusGate”. The Enquiry will be acutely aware of these matters, but I would like to include it, albeit briefly, because it shows a continuing pattern around the behaviour of Post Office directors and an arrogance, which I suggest should not be ignored. Common sense, integrity, ethical behaviour – not for this board, this CEO or this chairman.Nor, I suggest, for any of their respective predecessors. As noted, a director is required to act in good faith, act independently with the degree of care, diligence and skill, that may reasonably be expected from a person of his/her knowledge and experience. “Good faith”, has many meanings. It is suggested the boards of POL over 20 years, failed to act in good faith. The board is failing even today. Numerous POL senior staff (including the CEO) received part of their bonus for supporting the Enquiry. However, the Enquiry Chairman said he had not approved the process around this part of the bonus payments, even though the POL said it had received “confirmation” from him that the group “supported and enabled the Enquiry to finish in line with expectations.” Sir Wyn Williams said in a statement that this was “misleading and inaccurate”. POL said the CEO would return an unspecified part of the £455,000 that was awarded to him in bonuses in 2021-22. Is the board still in discussions with other senior leadership beneficiaries over their bonuses? Ethical behaviour and a basic understanding of the word “integrity” suggests the entire board and every person at POL who received a bonus should have repaid all of it, not “horse- trading”, in a general sense, about how much should be repaid. Perhaps the only point which requires a further comment (this is a paper about directors’ duties and governance) is the fact the CEO, Nick Read, in fact repaid initially and seemingly grudgingly, less than 5% of his bonus (£13,000 out of £455,000). That was almost certainly because of third party pressure, including from the then Chairman of the House of Commons Business and Trade, Select Committee. His one-year bonus is 75% of the government compensation offered recently to eligible sub postmasters, some of whom who died, were imprisoned, lost their lives and livelihoods, and that is just his bonus for a year, during which I suggest he fundamentally breached his directors’ duties. The CEO should be setting the standard for the organisation he runs. This is not a paper about BonusGate. I would, however, also note that the Remuneration Committee (Remco) of the board includes an ex global chairman of a law firm based in London and more recently an ex-COO (Amanda Burton) of a Magic Circle law firm. Ms Burton was asked to write a report about BonusGate. Ms Burton, (it is probably fair to say, as however polite others chose to be, they are not acting for victims of the Post Office Scandal) whitewashed BonusGate. Her review is, like so many matters relating to the Post Office, deplorable in its attempts to excuse and justify its actions, with no sense of shame or wrongdoing. Following Burton, an independent review on BonusGate produced by a City law firm (Simmons and Simmons), in August 2023 led to this point made by Darren Jones MP: It is unacceptable that the independent review was unable to conclude what had happened, based on a lack of documentary evidence and board members not remembering clearly what they discussed.” It is worth considering the approach that BEIS has taken towards directors who supposedly misstated their businesses revenue in order to obtain small £50,000 bounce back loans at the height of the pandemic when no other funding was available - disqualifying them as directors. Is not the impropriety committed by the directors of POL far worse? I repeat, although in an updated context, my previous question ---why is any director who was on the board at the time BonusGate was approved, still there? The Simmons and Simmons report into BonusGate issued in August 2023, is more than 60 pages long. It was prepared for reasons wholly different from those for which this paper is written. It cannot, of course, take account of the further layer of misery and disgust the behaviour of the Board of POL so far as BonusGate is concerned, has had on hundreds of sub postmasters. Such people almost never form part of these discussions. In addition, I do not believe the words “integrity” or ethical behaviour “find their way into the Simmons and Simmons Report. I have selected just two paragraphs from the report. This first perhaps sums up as well as anything, the overall failure of this board of directors and those sitting on Remco. It is important that the Enquiry moved onto a statutory footing on 1 June 2021 and was, from that point, anticipated to finish in the Autumn of 2022. For reasons that are unclear, neither RemCo nor POL Human Resources appear to have recognised the significance of this change or the consequences for the Enquiry Metric, particularly the consequence that the performance that the Enquiry Support Target incentivised would now be compelled by law. Had that been recognised and appropriately addressed by RemCo then the issues that we have considered in this Review would not have arisen because the Enquiry Support Target would likely not have been approved by RemCo in July 2021 either at all or certainly not in its final form. Those that we interviewed recognised with the benefit of hindsight that this was how RemCo ought to have proceeded. “[My highlights]. A key and very important principle of corporate governance is that the approach a company takes to designing its governance processes should be appropriately tailored to that company. POL is an entity that is very different from listed commercial companies - it is a private company limited by shares, classified as a public corporation with the Shareholder holding a Special Share in POL (the rights and privileges attaching to this Special Share are set out in the Articles). Neither the Shareholder nor UK Government Investments have any involvement in the day-to-day operations of POL or in the management of its network of post offices and staff. Whilst the POL Board retains operational control, it is accountable to the Shareholder for POL’s performance and is required to seek consent for certain matters, as set out in the Articles. POL’s strategy is to provide retail services as a commercial business but with a social purpose. In light of this relationship, structure and purpose, it is reasonable to expect adaptations to have been made to the approach taken by listed companies as it must also take into account the government-wide corporate guidance applicable to public corporations (as detailed in Appendix 2 of the Framework Document). Any assessment of POL’s governance practices must be considered in this context.” While this is understood, it does not excuse the basic failures under section 172, described above, or indeed other basic failures of governance. I note that the Report, as its first recommendation, states: Recommendation 1: POL should undertake a review of its governance structures, processes, and systems in relation to remuneration to ensure good corporate governance practice is being followed consistently and is in alignment with the role of the Shareholder and its duties. History suggests that review will lead nowhere. The board and the sole shareholder seem disinterested in making any genuine changes. This and previous boards ignored multiple reports in specialist trade and investigative publications over decades, such as Computer Weekly and Private Eye, as well as articles over many years by many well know journalist in the mainstream press; and BBC documentaries going back to 2015. It ignored MPs and MP committees. It fought to the very end, as if this was, and continues to be, a war, and then BonusGate being one example, seemingly took the intentional approach of not documenting its decisions. So many people have indicated this to me (which is why I am mentioning it specifically) the revulsion they feel for these people and their lack of integrity. Many have used specifically the word “evil.” Corporate governance cannot and should not operate in a moral vacuum.

The more I looked, the worse it got. Thanks to further superb investigations by Eleanor Sheik I mention, but will do no more, “Racial Profiling” which occurred during POL investigations. The relevant guidance, which was reportedly published between 2008 and 2011, required POL investigators to give sub-postmasters under suspicion a number, according to their racial background. Either the board knew over those years the profiling was in place, in which case why was it allowed to continue, or it didn’t know, in which case why not? The CEOs during those years were Adam Crozier and Moya Greene. POL has never explained the purpose of these racial categorisations, or what the profiling was used for. Indeed, Ms Rose, one of POL’s “internal auditors”, could not identify anything strange about the document outlining the practice.

PART 6 THE REMIT OF THE FINANCIAL REPORTING COUNCIL (FRC) AND CORPORATE GOVERNANCE “High-quality corporate governance contributes to long-term company performance” (FRC). The FRC’s mission is to promote transparency and integrity in business. It sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the Competent Authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality. In May 2023, the FRC announced its first detailed review into the UK corporate governance code for five years. It is hoped the review will take account of issues around the Post Office Scandal, so far as these are relevant. POL, a huge organisation with extreme public visibility, seems to have escaped the scrutiny of the FRC, as it escaped, apparently, the scrutiny of each body which in some way should have been involved with “making sure companies do the right thing”. It seems too, to have escaped any review by the numerous business schools, law faculties and similar organisations which delight in talking endlessly about corporate governance, ethical businesses and similar. Prospective students should perhaps be considering the Post Office Scandal for future theses. The rules and codes of the FRC apply only to listed companies, but why didn’t the FRC think of “having a look”? Conversely, which is the more important point, what was it that inhibited the Board of POL, for over 20 years, from setting the highest possible ethical standards and standards of integrity within and for the Company? It is what they aspired to in public documents – see below. We can clearly see the gulf between lofty ideals, and the reality of what happened on a daily basis in hundreds of post offices. Without real application, these statements are worthless. By way of example, and without jumping to any conclusions, it might not be unfair to suggest that the Board failed each of the following core principles (these from the UK Corporate Governance Code 2018): Board leadership and company purpose: [The emphasis is mine.]

A. A successful company is led by an effective and entrepreneurial board, whose role is to promote the long-term sustainable success of the company, generating value for shareholders and contributing to wider society. B. The board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned. All directors must act with integrity, lead by example and promote the desired culture. C. The board should ensure that the necessary resources are in place for the company to meet its objectives and measure performance against them. The board should also establish a framework of prudent and effective controls, which enable risk to be assessed and managed. D. [Omitted] E. The board should ensure that workforce policies and practices are consistent with the company’s values and support its long-term sustainable success. The workforce should be able to raise any matters of concern. Also . . . Audit, risk and internal control: F. The board should establish formal and transparent policies and procedures to ensure the independence and effectiveness of internal and external audit functions and satisfy itself on the integrity of financial and narrative statements. G. The board should present a fair, balanced and understandable assessment of the company’s position and prospects. H. The board should establish procedures to manage risk, oversee the internal control framework, and determine the nature and extent of the principal risks the company is willing to take in order to achieve its long-term strategic objectives. Did the Board of POL (then part of Royal Mail), from at least 2000 (and possibly earlier), for whatever reason, decide to ignore the codes and rules, a few of which are described briefly above? The first version of the UK Corporate Governance Code was published in 1992 by the Cadbury Committee. It defined corporate governance as “the system by which companies are directed and controlled”. I understand that I keep emphasising the point (because it is key to an investigation of the entire Post Office Scandal), boards of directors are responsible for the governance of their companies. The rules weren’t applicable specifically to POL/Royal Mail, but equally, common sense suggests it might have been useful to “have a look” if nothing more.

What inhibited the numerous directors over a 20-year period? These were/are, apparently not people lacking in corporate acumen. As noted, they took on very senior roles at a major UK state-owned entity, some coming from and then going to equally senior roles elsewhere, in both the public and the private sectors. What was it that convinced them that rules, laws and codes were for others? I understand as per the Simmons and Simmons report, that POL is a particular type of organisation, it is however not one immune from corporate governance. Certainly, no corporate structure should give a company, its board and (in this case) its shareholder, an “immunity” card. To close this part about governance below is part of the “POL-terms of reference 2020.” [Note: this is after the High Court judgments but before the Appeals].

Matters Reserved to the Board

PUBLIC 1 A. Purpose 1. The Board is collectively responsible for setting the Company’s strategic direction and primary business objectives. It establishes a robust governance framework and ensures that the Company has financial and human resources required to achieve its agreed objectives. 2. The Company is required to operate in accordance with the Companies Act 2006, the Company’s Articles of Association (the Articles) and any other applicable and appropriate regulatory requirements. The Company seeks to comply with the Financial Reporting Council’s UK Corporate Governance Code 2018, where appropriate. 3. The Directors’ statutory duties are set in the Companies Act 2006. One of the primary duties of the Directors is to promote the success of the Company for the benefit of its Shareholder [BEIS] and taking into account the interests of key stakeholders.” Below is how BEIS defined the purpose of its representative on the POL Board (submission to Select Committee Enquiry 2020): “UKGI acts as the shareholder representative for BEIS. As part of this role UKGI hold a Non-Executive Director (NED) seat on the POL Board and sits on its Audit and Risk Committee and the Renumeration Committee. In that capacity, the UKGI NED is one of four NEDs on the Post Office Board. The NED’s role is to challenge management, including the CEO, on financial and operating issues and the strategy to execute the company’s objectives. The Shareholder representative liaises with the BEIS Partnerships Team on governance matters.”

One wonders what ‘challenge’ the BEIS NED put forward over the period that this paper covers. In this case the words truly speak for themselves. PART 7 . . . AND FINALLY, THE “SMELL TEST” Did anyone stand back and ask themselves the simple question is this right?” Justice Neville Owen, Royal Commission into the collapse of HIH Insurance, 2003. Owen J said: There’s a moral underpinning to our system of values and we have to keep re- examining them. When you read the reports coming out of the Royal Commission, you ask the question forget about issues of right and wrong but what in the hell were they thinking? Did they ever apply the olfactory [“smell”] test? Did they ever go back and ask themselves, ‘What would my grandmother have thought of this?’” In every sense, I believe those words are more important than anything else in this Paper. I suggest that every director of POL (and before that, of the Royal Mail), going back some 20 years, failed the “smell test”. Each failed it massively and miserably. I submit on behalf of our clients, Tracy Felstead, Janet Skinner and Seema Misra, each director past and present, should be held to account by the legal system they sought to ignore and / or mislead. As I noted earlier, responsibility and accountability were lacking throughout the decades of the Post Office Scandal. The current board of directors, with its conduct subject to scrutiny before the Enquiry appears to have learned nothing, or at least ignored 20 years of history. Yet again, no matter how Nick Read, Henry Staunton and each director of the board try and spin it, no one else (except perhaps those paid to advise them) would, I suggest, think it/they pass the smell test. I would suggest also that the corporate officers (directors and others) of POL have, to date at least, managed “to get away with it” over more than two decades. Tracy Felstead was wrongly prosecuted, convicted and jailed when she was 19 years old. She is now 41 years old and there is still no closure for her. As I noted in no sense is this paper (nor is it intended to be) a mere academic discussion. To finish, I will quote a few words of our client Seema Misra, from her foreword to Nick Wallis’s book, The Great Post Office Scandal: The Post Office did not quite get away with it. They almost did. You may think it could never happen to you – or to someone you love . . . you would be wrong. It happened to me.” Nick Gould - 29 November 2023


1. For many decades I have been a corporate lawyer. I am also the lawyer who assisted Paul Marshall and Flora Page in some of the extraordinary work they did i in representing Seema Misra, Janet Skinner and Tracy Felstead, in their Appeals, before certain people within and outside the Post Office “decided” they had to be stopped.

2. The opinions in this paper are mine alone unless otherwise noted.

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