Alan Bates and Others v Post Office Limited

Question

Asked by

To ask His Majesty’s Government, following the December 2019 High Court judgment in the case of Alan Bates and Others v Post Office Limited, how many Post Office directors have been charged for breach of statutory duties under the Companies Act 2006, or for conspiracy to pervert justice.

I thank the noble Lord for his Question. I can confirm that no prosecutions have been brought against Post Office directors to date. The Horizon inquiry will establish the facts of what went wrong. It would be wrong to take action before we have all the evidence. Punishing people without looking at all the evidence first is how this scandal started. We should not repeat that error.

My Lords, I remind the Minister that the Government have the sole responsibility for law enforcement. It is no good saying that they are relying on some committee to turn up evidence; they have had 49 months, and in that time little has happened. The Government need to take steps to charge people for violation of the Companies Act, false accounting, lying under oath and conspiracy. After six years, they have not even yet managed to deal with the directors of Carillion. That does not inspire much confidence that they will be able to deal with the Post Office directors. The whole thing is being kicked into the next decade. Rather than hiding behind this inquiry, will the Minister now publish a schedule showing a timetable for the Government’s actions?

I thank the noble Lord for that. I know that there is a lot of frustration in this House and the other place on the timelines. This has been going on for a very long time—almost one generation. However, we have been very clear that we have to separate the two elements of this sad story. The immediate action we are taking is to overturn convictions and give compensation. We then come to accountability. A statutory inquiry is in place, and it will look at all the facts of the matter. At that point, a cascade of actions will be taken by the various bodies concerned. We need to understand the role of directors, the ministerial oversight and the role of Fujitsu and the auditor, EY. All that will be done once the facts are established and the Williams commission has reported.

My Lords, that is all very well and good, but is it not obvious that there was a catastrophic failure of governance on the part of the Post Office? This is a government-owned business. It is inconceivable that the board did not read the newspapers and was not aware of this. The Post Office is still operating. Should there not at least be a review of the standards of governance on that board?

The Post Office is publicly owned and set up as a limited company with a sole shareholder, which is the Government. Its governance is as an arm’s-length body with its own board, where the Government have a shareholder representative. It is clear that, over the years, not enough inquiry was made—particularly by non-executive directors—about what was going on. Why was it not asked why, pre-Horizon, prosecutions were between five and 10 per annum and then moved to between 80 and 100 per annum? The question is obvious: what happened here? As a High Court judge said at the 2019 appeal, the faith in the Horizon system was the modern-day

“equivalent of maintaining that the earth is flat”.

There has been a massive failure of corporate governance. Once we have the outcome of the inquiry, steps will be taken to make improvements to ensure this will not happen again.

My Lords, is it sensible for the Post Office to even continue in business as presently constituted? Is it not now a totally and irredeemably toxic brand? I personally would not trust the Post Office if it told me that today is Wednesday. As well as holding individuals to account, as owners, should the Government not look at a fresh start with a new brand, new leadership and a new business model incorporating the appropriate ethical principles?

I thank the noble and gallant Lord. That is exactly what the outcome will be. No prosecutions have been brought since 2015. The board has been reconstituted. There is a new chief executive, a new Postal Minister and new oversight. I take issue with the view that the Post Office brand is irredeemably damaged, because I believe the Post Office brand is based on the 11,500 postmasters and, if anything, their reputation has been enhanced by this. The reputations that have been damaged are those of management, directors and perhaps Ministers.

My Lords, did the shareholder member of the board report to government what was happening? The board must have known about the faults of Fujitsu. If that shareholder member did not, has government asked why?

I thank the noble and learned Baroness. This is exactly the issue we need to get to the bottom of. It goes back over a large number of years. We will be going back through files, ministerial appointments and meeting notes to find out exactly what notice was given and when. A ridiculous level of faith was given to the Horizon computer. Fujitsu has acknowledged culpability in this matter. Once the Williams report establishes the facts, we will be able to take necessary action to hold people accountable.

My Lords, to date, all the talk has been around what happened to sub-postmasters, but we should remember that Horizon was being used in the Crown offices, the branches that Post Office Ltd managed, so it would have seen the shortcomings of this system through its own management. It is not just a question of having to read the papers, as the noble Lord, Lord Forsyth, said; it was happening to its own businesses, and it was covering it up. Is this not further evidence that things should be done now, rather than waiting for some far judgment?

I thank the noble Lord for his question. The Horizon system has been upgraded—and upgraded again since 2017—and we now have a reasonable audit that it is now working satisfactorily. It will now be further replaced by a cloud system that will run alongside the current system, so I think there is now a feeling that there is efficacy in that system. What the noble Lord refers to is why there was an unshakeable belief in the computer system that went on for so long. We need to understand exactly how that happened, what the role of Fujitsu was in that, whether this was corporate malfeasance or the role of one or two individual bad actors, et cetera. We need to get to the bottom of that, and that is what the Williams inquiry will do.

My Lords, the reference my noble friend Lord Sikka made to the comparative inaction in respect to the directors of Carillion is but one of a number of scandals of which the Post Office Horizon scandal is the latest. It is another example of how poorly equipped the UK is to deal with corporate abuses.

Let us look across the Atlantic to New York. At the instance of Manhattan’s District Attorney, 17 of the Trump Organization’s many corporations were convicted of criminal offences, including tax fraud. Its chief financial officer pleaded guilty, was fined the maximum in compensation, and went to jail for five months. Now, the Attorney General of New York is asking a court to ban Trump and his three eldest children from ever running a corporate business in New York again, and to fine them $250 million. Can the Minister point me to any similar type of prosecution in this country, or tell me how that could ever happen here? I believe it could not.

I thank the noble Lord for that question. The Financial Reporting Council is the UK body that deals with accounting failures. It had a considerable review following the failure of Carillion and British Home Stores—the Sir John Kingman review in 2018. A number of Carillion’s previous directors have been disqualified and other cases are still under way. The FRC is now much more effective as an audit regulator—it has had a change of personnel, and the relationship between the FRC and the audit companies has been removed at further arm’s length. There is still a long way to go, but the FRC is now in a position to take more stringent action.

My Lords, this is not a new question. Noble Lords from across your Lordships’ House have been asking it, and I first raised it in 2019 after the court case. As a sole shareholder, His Majesty’s Government have both a right and a responsibility, so I take the Minister back to those original questions. What are we going to do to hold to account the board members who failed in their Companies House and directors’ duties when the Williams report comes?

The noble Lord is right to say that it is for the members of a company to take action against directors who have breached their statutory duties. In this case, the sole shareholder is the Government. Therefore, once the inquiry has finished, the Government will be in a position to take action specifically against any directors who have failed in their duties.