Bates v Post Office Ltd (No 3)

Bates v Post Office Ltd (No 3)
Post Office in Corsham
Court	High Court of Justice
Full case name	Bates & Others v Post Office Ltd (Judgment (No.3) "Common Issues")
Decided	15 March 2019
Citation(s)	[2019] EWHC QB 606
Court membership
Judge(s) sitting	The Honourable Mr Justice Fraser
Keywords
Good faith

Bates v Post Office Ltd (No 3) is a part judgment (the third of six), made in the group litigation order case of Bates & Others v Post Office Ltd, an English contract law case, concerning the term of good faith and various "common issues" in the British Post Office scandal.

Case

Five hundred and fifty subpostmasters (SPMs) and others were claimants against the Post Office Limited in group litigation. The claimants argued that the Post Office's Horizon software system for sales and accounting was defective and produced false accounting shortfalls for which the Post Office then wrongly held the claimants accountable. They argued this was a breach of contract, and good faith. The Post Office argued that the claimants were responsible for the shortfalls, claiming that this represented actual money missing, and brought many prosecutions, culminating in the British Post Office scandal.

Judgment

In the High Court, Lord Justice Fraser held there was a relational contract with a duty of good faith, fair dealing and transparency in the terms on liability, payment, termination and suspension in the contract. Some provisions were too unusual and onerous to be incorporated without being drawn specifically to the other party's attention. Twenty-nine bugs, errors and defects were identified and analysed in the Horizon software.

During the case, six separate judgments were handed down:

Judgment No 1 Applications to alter timetable – November 2017

Referring to costs and delay, the judge said, "Fitting hearings around their availability has all the disadvantages of doing an intricate jigsaw puzzle, with none of the fun associated with that activity."

Judgment No 2 Application to strike out evidence – October 2018

This decision followed a case management hearing and dismissed an application to strike out roughly one-quarter of the lead claimants' evidence – more than 160 paragraphs. Justice Fraser said:

"The application by the defendant to strike out this evidence appears to be an attempt to hollow out the Lead Claimants' case to the very barest of bones (to mix metaphors), if not beyond, and to keep evidence with which the defendant does not agree from being aired at all.

The judge commented that adverse publicity for Post Office was not a matter of concern for the court if the evidence was relevant and admissible. He also warned against the aggressive conduct of litigation, particularly in a group action of this nature. The application was dismissed.

Judgment No 3 Common Issues – March 2019

Main article: Bates v Post Office Ltd (No 3)

The subpostmasters and the Post Office had identified 23 issues relating to the contractual relationship between them and about which they disagreed. The judge made findings on each so that obligations under all iterations of the contracts would be settled, both retrospectively and prospectively. Of the 23 issues, 16 were decided in the subpostmasters' favour. The parties agreed that broadly the claimants were more successful. Issue 1, concerning whether the contracts were relational contracts, was described by the judge as one of the most important issues. He found subpostmasters' contracts are relational contracts: "This means that the Post Office is not entitled to act in a way that would be considered commercially unacceptable by reasonable and honest people".

In court, Fraser criticised testimony given by Post Office witnesses. The judge said Angela van den Bogerd (Head of Partnerships, Post Office) "did not give me frank evidence, and sought to obfuscate matters, and mislead me."

Of the evidence of one Post Office witness, the judge said, "The Post Office appears, at least at times, to conduct itself as though it is answerable only to itself. The statement that it is prepared to preserve documents – as though that were a concession – and the obdurate [sic] to accept the relevance of plainly important documents, and to refuse to produce them, is extremely worrying."

When the judgment was delivered, the Post Office said it would appeal. On 23 May, the judge refused the Post Office permission to appeal and set out his reasons on 17 June. The Post Office applied for permission to appeal that refusal. Lord Justice Coulson refused permission to appeal judgment No 3 and handed down his written reasons on 22 November.

Judgment No 4 Application for recusal – April 2019

The Post Office brought in legal-heavyweight Lord Grabiner to make an application to Fraser that he recuse himself. Grabiner was asked to explain the delay in making the application. He replied:

"It was made at board level within the client and it also involved the need for me to be got up to speed from a standing start. And I am not the only judicial figure or barrister that has looked at this with a view to reaching that conclusion."

The recusal application was opposed by the subpostmasters and dismissed by the judge. Lord Justice Coulson refused the Post Office permission to appeal the refusal to recuse. The Law Society Gazette wrote:

"In a scathing 17-page judgment, the Court of Appeal has thrown out an attempt by the Post Office to appeal a judge's refusal to recuse himself from group litigation on the grounds of bias. Ruling in Post Office Limited v Alan Bates & Ors, the Rt. Hon. Lord Justice Coulson said that the recusal application 'never had any substance and was rightly rejected by the judge'. He also expressed sympathy with the suspicion raised by the other party in the case, a group of sub-postmasters and mistresses, that the recusal application had been made in the hope that a sub-trial would collapse. 'Although I can reach no concluded view on the matter, I can at least understand why the [sub-postmasters and mistresses] submitted that was its purpose', Coulson LJ said."

Of the submission by Grabiner, that he was not the only judicial figure or barrister who had looked at the decision to seek recusal, Coulson said: "Such a comment, presumably made in terrorem, should not have been made at least without proper explanation of its relevance." The Law Society Gazette wrote:

"The judge confirmed that the Post Office has already agreed to pay £300,000 in respect of the costs of a failed application earlier this year to have him recused. The Post Office's own costs of the recusal application were over £212,000, which included £34,165 for solicitors and £174,815 for counsel."

Judgment No 5 Common Issues costs – June 2019

In an article in the Law Society Gazette John Hyde wrote:

"The Common Issues trial, as the court referred to it, sought to resolve 23 matters relating to different contracts. It was tried over a month at the end of 2018, and the Post Office has asked the court to reserve the cost of that trial. An order now, rather than at the very end of litigation, ‘would demonstrate a pre-determination as to the overall outcome’, the Post Office submitted. But the judge was concerned this submission was a 'veiled or implied threat', mirroring the Post Office's approach to its recusal application – namely, claiming that any interim decision would suggest the overall outcome had already been decided. Fraser J said it was 'entirely conventional' for costs orders to be made where litigation is dealt with in stages. He added: 'I make it clear (once again) that I have no such pre-determined view on any matters yet to be fully tried.' He continued: 'The claimants would not be on an equal footing with the Post Office, a publicly funded body, if I reserved the costs of the Common Issues trial until the very end of the litigation.' Noting that the Post Office succeeded on seven of the 23 common issues on trial, he awarded the claimants, who are backed by Therium Capital, their costs subject to a 10% reduction."

Judgment No 6 Horizon issues – December 2019

This judgment concerns the operation and functionality of the Horizon system itself. The hearings took place in March, April, June and July 2019. The hearings were interrupted by the Post Office's application for the judge to recuse himself, to appeal his refusal to recuse himself, and his judgment No 3. The judgment was published in December 2019. Twenty-nine bugs, errors and defects were identified and analysed. Witnesses for the subpostmasters and for the Post Office submitted statements and gave oral evidence. Documents that had been submitted, and further documents, the submission of which had been resisted were, after argument and rulings, submitted. These included the 'Known Error Logs' and the 'PEAKs', a browser-based software incident and problem management system used by Fujitsu for the Post Office account. Permission was given for two IT experts to be called, one for the claimants (Jason Coyne) and one for the Post Office (Robert Worden).

The important judgment was about whether the Horizon computer system worked and was "robust", which the Post Office said it was. Again, the judge found overwhelmingly in favour of the subpostmasters and that the original version of Horizon was "not robust" and, as to the later version, "its robustness was questionable, and did not justify the confidence placed in it by the Post Office in terms of its accuracy."

During this trial, the Post Office issued an application that the judge recuse himself. Just as the judge returned to court for the final afternoon of evidence, solicitor and journalist Joshua Rozenberg reported, "he was told that the Post Office had served an application for his recusal ... Counsel representing Post Office on the Horizon issues had apparently not seen it. He made no mention of it that morning". The application led to Fraser's Judgment No. 4, and then to an application for permission to appeal that judgment. The applications and the appeal failed but caused considerable delay.

Fraser commented on the evidence given by Stephen Parker, Head of Post Office Application Support, Fujitsu:

"I do not consider that Mr Parker was interested in accuracy in any of his evidential exercises. ... I do not consider his evidence in his witness statements to have been remotely accurate, even though he stoutly maintained that it was."

Fraser said:

"[T]he possibility of future (as opposed to current) criminal prosecutions, or the potentially criminal impact upon individual subpostmasters, did more than hover in the background to the Horizon Issues trial. Some claimants who gave evidence in this trial were expressly accused by the Post Office of criminal offences in cross-examination in this trial, something which had also occurred in the Common Issues trial."

See also

• English contract law
• UK enterprise law
• Alan Bates (subpostmaster) – British campaigner and former subpostmaster