1 Friday, 12 July 2024 2 (9.45 am) 3 MR BEER: Good morning, sir, can you see and hear us? 4 SIR WYN WILLIAMS: Yes, I can, thank you. 5 MR BEER: Thank you very much, may I call Richard Callard, 6 please. 7 SIR WYN WILLIAMS: Yes. 8 RICHARD JOHN CALLARD (sworn) 9 Questioned by MR BEER 10 MR BEER: Good morning, Mr Callard. My name is Jason Beer, 11 as you know, and I ask on behalf of the Inquiry. Can 12 you tell us your full name, please? 13 A. Richard John Callard. 14 Q. You've made a long statement, 163 pages, excluding the 15 exhibit sheets, dated 14 June 2024. The URN for that is 16 WITN00140100. If we can have that up on the screen, 17 please, and look at the bottom of page 23. Right at the 18 bottom, thank you. 19 Do you see the last line on the page, going into the 20 next page? It currently reads: 21 "By this time, Jenny Willott MP had replaced Jo 22 Swinson MP whilst Jo Swinson MP was on maternity leave." 23 Is there a correction you'd like to make to that 24 sentence? 25 A. Yes, please. I realised, after I read Jo Swinson's 1 1 witness statement, that she had returned from maternity 2 leave in June. So it should read that by this time Jo 3 Swinson had returned from maternity leave. 4 Q. If you could just angle those microphones and just move 5 forward a little bit. Thank you very much. 6 So the sentence should read "By this time Jo Swinson 7 had returned from maternity leave"? 8 A. That's correct. 9 Q. Thank you. If you can turn, please, to page 173; is 10 that your signature? 11 A. It is. 12 Q. With that correction brought into account, are the 13 contents of the witness statement true to the best of 14 your knowledge and belief? 15 A. Yes, they are. 16 Q. Thank you. You can put that to one side, thank you. 17 Can I start with your background, please. In summary 18 terms is this right: you qualified as a chartered 19 accountant in 2001 and joined Arthur Andersen, as it 20 then was, in 2002? 21 A. That's correct. 22 Q. You joined the Shareholder Executive, ShEx, as we're 23 going to call it, initially on secondment in March 2007 24 and then permanently from March 2009? 25 A. That's correct. 2 1 Q. You started to lead the ShEx Post Office Team in January 2 2014 and were appointed as the Shareholder Non-Exec 3 Director for the Post Office in March 2014? 4 A. That's correct. 5 Q. So you had two roles: Head of the Shareholder Team 6 within ShEx and the Shareholder NED for the Post Office? 7 A. Yes, that's correct. 8 Q. You held the Post Office Board role until March 2018, 9 and the Head of the Shareholder Team role for Post 10 Office until May 2018? 11 A. That's correct. 12 Q. You remain an Executive Director of UKGI, the successor 13 organisation to ShEx? 14 A. That's correct. 15 Q. Thank you. Can I start then by asking you some 16 questions about the role you performed as 17 a Non-Executive Director, as a NED? 18 A. Mm-hm. 19 Q. These questions are based on what you say in 20 paragraphs 8, 13 and 14 of your witness statement. 21 There's no need to turn them up. 22 You say that when you started working at the Post 23 Office as a Non-Executive Director, you first had no 24 experience as a NED; is that right? 25 A. That's correct. 3 1 Q. You, second, had little knowledge of the Post Office? 2 A. I suppose I'd had a two-month run-in as the other 3 Shareholder Team, noting that I'd been on paternity 4 leave as well, but yes. 5 Q. Third, you say that you found your new role as Head of 6 the ShEx Team for the Post Office overwhelming, in 7 particular because that role had been split previously 8 between two people? 9 A. That's correct. 10 Q. Did you ever raise your concerns about your capacity or 11 capability to undertake the role of a Non-Executive 12 Director on the Post Office Board? 13 A. No, because, to start with, I thought I'd see how it 14 went and if I could manage. I was doing 50 per cent -- 15 theoretically, 50 per cent of my time on the Green 16 Investment Bank shareholding, 50 per cent of my time on 17 the Post Office shareholding and then the Non-Executive 18 role was a sort of -- I'm not sure whether it was 19 considered part of the 50 per cent of the Post Office. 20 But the way UKGI and ShEx works is that you tend to have 21 a -- everybody has quite full workload, so whilst I say 22 it was overwhelming, it was, but I think it was more 23 about the sheer number of issues that were on the 24 agenda, as opposed to the level of workload. 25 Q. Having taken on the role for which you had no prior 4 1 experience, did you receive any relevant training or 2 mentoring? 3 A. Not particularly. I went on a course with regard to 4 being a NED and, clearly, I'd picked up snippets and 5 experience from other people but there was nothing 6 particularly formal to start with. 7 Q. Even though you were new to the role of a Non-Executive 8 Director -- 9 A. Yeah. 10 Q. -- at this early stage, did you at least know that the 11 core part of a role of a Board would be to provide 12 appropriate challenge to the thinking and strategic of 13 the executive of a company? 14 A. Yes. 15 Q. Did you understand that the Non-Executive Director, the 16 NED's role, within that function, was in particular to 17 provide independent oversight -- 18 A. Yes. 19 Q. -- and a constructive challenge to the Executive 20 Directors? 21 A. Yes. 22 Q. When you took up the role, did you have any 23 understanding or recognition of the risk inherent in 24 an organisation dealing with longstanding challenges 25 that they -- or the organisation -- may develop 5 1 entrenched views, sometimes called groupthink? 2 A. Well, I'd certainly heard of groupthink, and clearly 3 there's always a bit of history, but I don't think I had 4 any specific worries about that in that sense. There 5 was -- when I joined, although Post Office is, I don't 6 know, 300-odd years old, it had only just come out from 7 under Royal Mail and had a relatively new Board, which 8 it never had before, so everybody on that Board was 9 pretty new to Post Office. 10 Q. Does it follow that you didn't regard it as a particular 11 function of your job as a Non-Executive Director to be 12 alive to that risk of ingrained thinking or groupthink, 13 and be the one that ought to identify it and challenge 14 it? 15 A. I don't recall thinking that way specifically. So -- 16 but I was aware that that is what my role was and I did 17 ask questions about a whole range of topics as part of 18 my role. 19 Q. You do mention in your witness statement that you asked 20 questions over the years that you fulfilled the function 21 of NED, but in your witness statement, you don't appear 22 to identify any point at which you provided any 23 significant challenge to the Executive; would you agree? 24 A. No, I wouldn't agree with that. 25 Q. Which were the occasions when you significantly and 6 1 directly challenged the Executive? 2 A. Are you talking about Horizon specifically or generally? 3 Q. Horizon specifically? 4 A. Well, I think I asked questions around whether people 5 had appealed because I couldn't understand why people -- 6 if there'd been miscarriages of justice, why people 7 hadn't appealed. 8 Q. Just stopping there, isn't that a request for 9 information rather than a challenge to the approach or 10 direction that the company was taking? 11 A. Yes, I suppose you're right. Yeah. 12 Q. I'm thinking about challenging and saying "What you're 13 doing, in my view, is wrong, it's the wrong path to 14 take. I would vote for ... I suggest you do X"? 15 A. I suppose when I got there, I inherited a position which 16 was relatively -- I felt relatively established. There 17 had been -- you know, Second Sight had been appointed at 18 sometime in 2012, they had then produced a report in 19 July '13. I thought Post Office's response to the 20 findings of that report, in terms of setting up 21 a Business Improvement Programme, setting up a Mediation 22 Scheme, where individual cases would be looked at and 23 also looking at prosecutions, was a reasonable response 24 to the information that was being received at the time. 25 So I was relatively satisfied with what was going on 7 1 at that point. And I also received -- the information 2 I was getting from the team I inherited was similar. So 3 I'm not sure I felt the need to directly challenge in 4 that way because there was quite a bit of work and 5 investigation already ongoing, in terms of individual 6 cases within the Mediation Scheme being investigated 7 and, periodically, we then -- you know, there was things 8 around Deloittes, there was Linklaters, et cetera, and 9 I also volunteered to join the Sparrow subcommittee 10 because I was quite clear that ministers would want to 11 understand what was going on. 12 So whilst I didn't -- I can't think of any examples 13 that were directly challenging, I felt that was 14 a reflection of the fact that, at the time I joined, 15 I didn't feel I particularly needed to. 16 Q. So was that state of being relatively satisfied or being 17 in a state of relative satisfaction one that continued 18 for the entirety of your role as a NED? 19 A. No, I think if you -- we were continually worried about 20 the issue of Sparrow, as I'll probably call it 21 throughout today -- 22 Q. I'm looking -- sorry to speak over you, Mr Callard. 23 You've mentioned asking for information. You said you 24 were worried or concerned. 25 A. Yeah. 8 1 Q. I'm asking, was there any occasion when you actively 2 challenged the Executive? 3 A. There will have been but I can't remember specific 4 examples. But at the Sparrow subcommittee, that is 5 where the forum would be to ask specific questions of 6 the Executive. A lot of those were focused around 7 how -- or by the time I got there, because of what -- 8 the information, I understood it to be around the system 9 itself, it was around how we deal with the problems at 10 the Mediation Scheme was happening. On reflection, 11 knowing what I know now, I probably should have asked 12 more probing questions about the specifics of the IT 13 itself but, as I say, the position I inherited felt 14 a relatively good position, even though the Mediation 15 Scheme itself was starting to somewhat go awry. 16 Q. Did you see your role as the ShEx representative on the 17 Board to be to represent the interests of taxpayers? 18 A. Yes, I think so. It was to represent -- the role of 19 a Shareholder NED, to my mind, is one of -- aside from 20 being an independent NED in its own right, it also has 21 an overlay of bringing a Government perspective to the 22 Board and bringing the Board's perspective to the 23 Government, so that they can understand each other 24 better. 25 Q. You tell us in your witness statement, it's 9 1 paragraph 39, that you did not see the responsibilities 2 of the Board of Directors as being fundamentally 3 different in Post Office to those that would ordinarily 4 apply to the Board of a large company, simply by virtue 5 of the fact that the company was wholly owned by the 6 Government. Can I ask, given that the Post Office was 7 effectively spending public funds, did you not consider 8 that there was a greater accountability on Post Office 9 than in the case of a private commercial entity? 10 A. I suppose we view, almost in some respects, somewhat 11 neutral about who owns the business itself. But we do 12 feel accountable to taxpayers in terms of how money is 13 spent and what it goes on. That is not to say that we 14 don't want the money to be spent, it's more about value 15 for money. Are you getting what you are paying for? So 16 we do did have -- I did have in mind an eye to things 17 like costs but also -- 18 Q. That would apply in a -- sorry to speak over you again. 19 That would apply in a straightforward commercial 20 company? 21 A. Yes, and I don't really see there's a -- you know, it 22 wouldn't be that different to a commercial company. The 23 part -- the way ShEx works is to almost treat its 24 businesses to the extent it can as commercial entities 25 because that's what we want them to be. Now, they're in 10 1 ShEx or UKGI because there's something -- you know, they 2 can't quite be commercial. So in Post Office's case, 3 for example, they have to keep open 3,000 branches that 4 would otherwise be unviable but, otherwise, we want them 5 to operate like a commercial entity and, through ShEx, 6 that's the kind of the sort of culture we're trying to 7 bring. 8 Q. So you could have been selling oil or making microchips, 9 it didn't matter that this was public money being spent, 10 in the provision of a public service? 11 A. Well, of course it matters and you always have an eye to 12 the fact that you're ultimately responsible through to 13 Parliament that -- so you want to make sure it gives 14 an extra angle, as it were, when you're looking at 15 a business case about money, that you know that the 16 money you've got to get won't otherwise go into 17 a hospital or a school. So there is that angle. 18 So we do -- you do -- one does think of the taxpayer 19 and that is the added angle that you bring, I suppose, 20 as a Non-Exec, a Shareholder Non-Exec because you've got 21 to think about the wider position of the Department and 22 the wider priorities. 23 Q. Can I turn to potential conflicts of interest. In 24 paragraphs 10, 16, 63, and 317 to 19 of your witness 25 statement, you discuss the potential conflict of 11 1 interest which the Post Office Board perceived to exist 2 between the Post Office, on the one hand, and the 3 Government, as Post Office's shareholder on the other, 4 and you give a specific example of Board discussions of 5 Government funding levels as posing a problem? 6 A. Yeah. 7 Q. You indicate that you were conscious of the potential 8 for you personally to be placed in a position of 9 conflict of interest and, therefore, decided to absent 10 yourself from certain parts of certain Board meetings -- 11 A. Mm. 12 Q. -- particularly when funding was discussed, agreed? 13 A. That's correct. 14 Q. Can you explain what specifically the perceived conflict 15 was, please, in relation to the Post Office's funding? 16 A. So, as a Non-Executive Director, you are there to 17 promote the interests of the company and I suppose, in 18 a crude way, the more investment that you get, the 19 better it is for the company. With your Civil Service 20 hat on, clearly you're there to look after public funds. 21 You want to make sure that the right amount of money 22 goes to the Post Office, or any other business that you 23 look after, and you're also very conscious that there is 24 limits on the level of taxpayer funding that can go to 25 the Post Office, as I say. 12 1 And so those two things somewhat conflict. Not all 2 the time but they do somewhat conflict when the Board is 3 making decisions about what it's applying to the 4 Government for and I remember, it was one particular 5 Board meeting, it was a strategy away day where they 6 proposed -- Post Office proposed a number which 7 I thought was just far too big, and I said so. And, as 8 a team, the Shareholder Team, a lot of our efforts over 9 the course of the next 12 to 18 months were around 10 pushing that figure down in one direction and yet, at 11 the same time when we went to the Department, explaining 12 to the Department why we needed -- why Post Office 13 needed that investment. 14 And so you're trying to bring down their 15 expectations and get comfortable with the level of 16 funding that, as a Shareholder Team, you think Post 17 Office needs for what it wants to do, whilst, at the 18 same time, going into bat with the Department to say "We 19 think you need to provide X hundred million to Post 20 Office to provide them" -- 21 Q. When you said that number is too high, which hat were 22 you wearing? Were you -- 23 A. Well, I often, in Boards, would say which hat I was 24 wearing, I'd specifically say, and I think I -- 25 Q. So on that occasion -- 13 1 A. So on that occasion I think I will have said, "Look, 2 this number is too high for Government". But no one is 3 countenancing that -- 4 Q. Why were you entitled to say that, if you thought that 5 there was a conflict of interest in representing 6 Government's views on funding issues within the Board? 7 A. Sorry, I don't quite understand the question. 8 Q. Yes. You told us that there was a conflict of 9 interest -- 10 A. Yes. 11 Q. -- on occasions -- 12 A. Yes. 13 Q. -- in particular in relation to funding -- 14 A. Yes. 15 Q. -- because the Board's overall aim -- this is describing 16 things in very generic terms -- would be to secure from 17 Government the highest level of funding that was 18 possible? 19 A. Yes. 20 Q. That would not -- 21 A. Within reason. 22 Q. Yes. That would not necessarily be Government's 23 number 1 choice or priority? 24 A. Yeah, yeah. 25 Q. When you said in a Board meeting "That number is too 14 1 high", were you saying that as the Government's 2 representative? 3 A. Yes, and I would probably be saying it as well as 4 a Shareholder NED -- I suppose knowing -- understanding 5 the Government context. So whether I actually said, 6 "I'm putting my government hat on", specifically, but 7 I just felt that the -- I wanted to set expectations 8 that that figure felt quite high. Now -- 9 Q. So hold on -- 10 A. -- I didn't see that was a conflict in saying that at 11 the time. There was lots of discussions about funding 12 within the Post Office Board. I only -- I think 13 I recused myself from two discussions. Now, the reason 14 why I recused myself in those particular discussions was 15 because I could tell -- (a) I could pick up the feeling 16 from the Board but the discussion that was going to 17 happen then was more about the tactics and -- of the 18 Board as to what they're going to do, given that 19 Government is not giving them the money that they 20 wanted, and I don't think they felt comfortable and 21 I didn't feel comfortable in discussions around "Okay, 22 so what's our next move with Government". 23 You know, I didn't feel comfortable being in that 24 discussion and I don't think they felt me being 25 comfortable there because they weren't sure what I would 15 1 take back to the Department. There was plenty of 2 discussions we did have when I was in the room, about 3 funding, about what is this money for, what is the 4 business case for, is this the right direction, 5 et cetera. So I apologise if I've given you the 6 impression that I was never in the room of the Board for 7 funding discussions. There were plenty of funding 8 discussions but there were some specific times that 9 I recused myself because I wasn't comfortable being 10 there and the Board wasn't comfortable with me being 11 there. 12 Q. Can you give us any other examples of specific areas 13 where the Board considered there to be a conflict of 14 interest or potential conflict of interest in you acting 15 both as a Board member and also as a member of the 16 Shareholder Executive? 17 A. Not particularly to be honest. I mean, some members -- 18 I was first Shareholder NED that was also part of the 19 Shareholder Team so my predecessor, Susannah Storey, had 20 been separate to ShEx. Although she was -- had been 21 a ShEx person she was ex-ShEx, so I remember there was 22 a bit of discomfort when I first joined and I think 23 there was a concern about the sharing of Board papers 24 and those sorts of procedural issues, which I suppose 25 you could say is some sort of conflict. 16 1 I'm not sure they wanted -- Boards tend to be very 2 sensitive about -- 3 Q. Specifically, Mr Callard, did you or any other Board 4 members perceive any conflict or potential conflict in 5 relation to Horizon issues on any occasion? 6 A. No, I don't think so. 7 Q. Did you feel constrained in any way in disclosing 8 information by reason of your signature of NDAs, 9 non-disclosure agreements? 10 A. No, because the NDA agreement was specifically, I think, 11 worded to allow me to share Board papers with my team 12 and others in Government, if I felt it appropriate. 13 Q. So the NDAs did not inhibit your ability to relay any 14 matters of concern about Post Office to Government? 15 A. No. 16 Q. You tell us in paragraph 42 of your witness statement 17 about circumstances in Board meetings where you spoke 18 with your "NED hat on" or your "Government/shareholder 19 hat on", as you described -- 20 A. Yeah. 21 Q. -- and you say you might, for example, state that you 22 agreed with the Board's course of action, given what you 23 knew from Board discussions and your responsibilities as 24 a NED to the company -- 25 A. Mm-hm. 17 1 Q. -- but would make it clear that ministers might not 2 necessarily agree? 3 A. Yeah. 4 Q. What did you understand, in your words, your 5 responsibilities as a NED to the company to mean? 6 A. So you're there to promote the success of the company. 7 So if I can give an example that might demonstrate that. 8 So there were -- for example, there were redundancy 9 programmes periodically to be done in the Post Office to 10 make them more efficient, so, for example, in the cash 11 supply chain, which was felt to be over-manned, and so 12 as a NED, I was quite content, having looked at the 13 business case for it, for those redundancies to go 14 thorough. But, clearly, redundancies are a politically 15 sensitive matter, so I would say "Well, as a NED, using 16 my independent judgement, I would agree with this change 17 but what we do need to do is inform the Minister because 18 it could have political ramifications. It's not that 19 they'll say no but I need to warn them and we need to 20 just make sure there's no objection". 21 Q. You give examples in your witness statement where you 22 might be wearing two hats -- 23 A. Yeah. 24 Q. -- and had to make clear that fact, as including issues 25 of executive remuneration, mutualisation -- 18 1 A. Yeah. 2 Q. -- funding, pension changes and Sparrow? 3 A. Yeah. 4 Q. In what ways did you believe your duties as a Director 5 were not or may not have been aligned with the interests 6 of the Government, its sole shareholder, in relation to 7 Sparrow? 8 A. It's less about not being in line, it's just not really 9 understanding the ministerial position and going back 10 for clarification. So I'm thinking specifically around 11 some of the decisions at the Sparrow subcommittee were 12 looking at, say, towards the start of June and the end 13 of April, where there were worries and concerns about 14 the investigations into each case of mediation not 15 proceeding quick enough and sort of almost getting stuck 16 with Second Sight, because they were only two people 17 versus the investigatory team at Post Office that had 18 20. 19 And so the options that were put forward by the 20 Executive and discussed by the subcommittee, it was 21 acknowledged that, to the extent that the Board decided 22 to do something, you'd have to go back to ministers, 23 particularly given the Parliamentary undertakings they 24 had made about Second Sight, for example, to say "Well, 25 you know, we would need ministerial consent or whatever 19 1 to take a course of action". 2 So whilst I could, as a NED, say, well, I think this 3 is perhaps the right way forward because clearly X and Y 4 is happening and this looks like the right course of 5 action, I don't know how a minister feels about that. 6 They may say yes, they may say no to it, so we've got to 7 be live to that sort of thinking, so that's what I meant 8 by that particular example. 9 Q. You tell us in paragraph 61 to 62 of your witness 10 statement that you shared the vast majority of 11 information that you received in your capacity -- 12 A. Yes. 13 Q. -- as a Shareholder NED with the Shareholder Team, 14 without restriction. Correct? 15 A. Yes. 16 Q. Did you take the same approach, ie sharing the vast 17 majority of information, in relation to ministers and 18 civil servants outside of ShEx? 19 A. No, not in that way because the stuff you get through 20 from -- Board packs would be 150 to 250 pages. You 21 wouldn't share those with the Minister. They have -- 22 Q. Did you consider there to be a restriction of 23 a different kind in sharing information that you learned 24 in your capacity as Shareholder NED outside of the ShEx 25 team? 20 1 A. No, I never felt there was things that I couldn't tell 2 ministers if I felt it appropriate to do so. 3 Q. So you were able, you thought, to show Board papers to 4 ministers and civil servants outside of ShEx, if the 5 occasion arose? 6 A. If -- I mean, I very rarely shared Board papers outside 7 of ShEx because I never felt there was a need to. What 8 we would do, if there was something to be said, we would 9 put that into a some sort of submission or some sort of 10 email and circulate it, rather than actually sharing the 11 paper itself. 12 Q. So never mind how the information was conveyed, you 13 considered yourself able to inform ministers and civil 14 servants outside of ShEx of the substance and detail of 15 Post Office Board decisions without restriction? 16 A. Yes, whether I did or not, it comes down to my judgement 17 at the time and what the matter is and what I think 18 people's views are, but, yes, I never felt I couldn't 19 share the gist of it and the content of it. I wouldn't 20 necessarily share the papers themselves. 21 Q. You said that you shared the vast majority of 22 information you received -- 23 A. Yeah. 24 Q. -- in your capacity. Can you give us some examples of 25 information that didn't fall within the vast majority? 21 1 A. I was largely thinking there of pensions, the pensions 2 subcommittee. So when I first joined Post Office I was 3 asked to go on the pensions subcommittee, which was 4 looking specifically at closing the defined benefits 5 pension scheme, because a deficit was emerging. There 6 was no one on my team particularly at that point that 7 really understood pensions. I'd dealt with pensions 8 under Royal Mail, so I don't recall particularly 9 sharing -- until we got to the point where there was 10 going to be an announcement about it -- particularly 11 sharing any pensions subcommittee -- 12 Q. That wasn't because of a restriction though, that was 13 just because the -- 14 A. Yes, the -- 15 Q. -- circumstances didn't warrant it? 16 A. Quite. 17 Q. So information could be shared, in your view -- 18 A. Yes. 19 Q. -- that you learnt in your capacity as Shareholder NED 20 through attending meetings, through reading Board 21 papers -- 22 A. Yeah. 23 Q. -- and otherwise -- 24 A. Yeah. 25 Q. -- without restriction, with ministers and civil 22 1 servants? 2 A. Yeah. I would filter that but yes. 3 Q. But the filter you applied was not because of any 4 restriction? 5 A. No, it's to do with my judgement and what I think people 6 know and what I felt was relevant. 7 Q. You tell us in paragraph 69 of your witness statement 8 that you found it difficult to identify the correct 9 balance when it came to the appropriate level of 10 Government engagement on the Horizon issue. What did 11 you mean by that? 12 A. I think -- sorry, without seeing the paragraph, um, 13 I think the position I inherited -- 14 Q. We can look at the paragraph to help. 15 A. Oh, I can just look -- 16 Q. Page 35. 17 A. Page 35, thank you. I should have brought my -- 18 Q. It will come up on the screen, page 35. 19 A. I think I explain it in the paragraph. 20 Q. Just wait for it. 21 A. Sorry. 22 Q. It was the sentence which I just read in the first line: 23 "In general terms, I found it difficult to identify 24 the correct balance when it came to the appropriate 25 level of Government engagement on the Horizon issue." 23 1 A. Yeah, yeah, so not unlike other arm's-length bodies I've 2 dealt with prior to that and was dealing with at the 3 time, you know, there's a balance between operational 4 independence of that body, because it's a specialist 5 body, and the desire sometimes of ministers and of 6 Government to intervene and do things. And I think on 7 Sparrow that was a particularly difficult one because 8 you had some very difficult stories, it was in the news 9 a lot -- 10 Q. Sorry, what do you mean you had some very difficult 11 stories? 12 A. Oh, sorry, well, the position of subpostmasters as 13 articulated by the story, you know, the -- their 14 experiences that were in the news, were obviously very 15 distressing and there's a natural inclination, I think, 16 of Government and particularly of ministers to want to 17 do something. But on the flipside, there is a business 18 there which is operationally -- maybe operationally 19 independent but also specialist, it is -- it's business. 20 And the -- trying to think about what ministers or what 21 civil servants like me could actually do, given it was 22 quite a sort of technical topic, it's quite a difficult 23 balance. 24 And, I think, throughout my time, it was a constant 25 balance between trying to keep at arm's length and -- 24 1 from it because, realistically, there was not much that 2 I didn't think there was much that the ministers could 3 realistically do, whilst at the same time trying to make 4 sure that the Post Office are doing the right thing and 5 understanding what's going on at their end. And I just 6 found that quite a difficult balance, I think in part 7 because we never quite -- you know, sadly, and I regret 8 it -- we never quite got to the bottom of whether there 9 was a -- where the problem was. 10 There were lots of investigations and each time 11 there was an investigation, it came back that there 12 wasn't really an issue and there were investigations 13 throughout my time, there's the Mediation Scheme, there 14 was the Parker Review and then the litigation. And 15 throughout that, particularly to the litigation, we 16 weren't really getting any particular news that there 17 was a particularly identifiable issue with Horizon which 18 caused losses to subpostmasters and, without that link, 19 it's very difficult to then do something. 20 Q. Do you think, Mr Callard, that's a result of not looking 21 hard enough because now you've looked at some of the 22 papers themselves, ie you've looked at all of the Second 23 Sight Reports, you've looked at the Parker Review 24 itself -- 25 A. Yeah. 25 1 Q. -- rather than a letter summarising it -- 2 A. Yeah, yeah. 3 Q. -- you've looked in detail at the Deloitte reports -- 4 A. Yeah. 5 Q. -- rather than summaries of them -- 6 A. Yeah. 7 Q. -- and you've discovered a whole host of information 8 that puts an entirely different complexion on things? 9 A. Yes, it does. So, clearly, I was not curious enough. 10 I think that's probably self-evident but, as I said, 11 there was always some form of investigation going on, 12 there'd been 18 months' of investigation before I got 13 there, and I think that the problem I'd sort of had in 14 some respects was that -- and you can see this in some 15 of the papers by the time we get to December '14/early 16 '15, and that represents what, about two years' worth of 17 investigation, what we're getting back is that there 18 isn't an issue with the IT, and so you get to the point, 19 well, every time we do review it says there isn't 20 something there and you're almost in the zone of trying 21 to prove a negative, that there isn't a problem and 22 I never thought that was ever going to be very easy to 23 get to, which is why I thought we always need to -- it 24 needs to go to court because -- 25 Q. That view might be said to be fatalistic. 26 1 A. Quite possibly but I mean -- 2 Q. Does that fairly represent -- 3 A. I'm not sure what you mean by fatalistic, in that sense, 4 sorry? 5 Q. Ie this needs to be litigated by the parties and a truly 6 independent view taken by a member of the judiciary? 7 A. Well, it wasn't that it needed a truly independent view 8 because I thought we'd had -- we were getting 9 independent views through from the likes of Second Sight 10 and I'm sure we'll probably come on to their reports in 11 due course. It was more about how do you -- my thoughts 12 about going to court was more about how do you draw 13 a line under it because when you've got a very committed 14 set of people in the form of the JFSA, who are certain 15 that there is a problem, and yet the investigations done 16 by Post Office, Second Sight and others, and including 17 things around like the Cartwright King review, 18 et cetera, are saying there isn't a problem, you know, 19 you'll never be able to meet in the middle. 20 So the court -- my views about the court were less 21 about there being independent scrutiny; it was more 22 about, if the court says -- you know, says what it says, 23 then there's nowhere else for either party to go, it 24 kind of arbitrates, and I always felt that I couldn't 25 really arbitrate in my position. 27 1 Q. Can I ask you to slow down a little bit in your answers, 2 even though they're very long, the shorthand writer is 3 struggling to take down each of the words that you say. 4 A. Okay. 5 Q. Do you consider, standing back, that you showed undue 6 deference to what Post Office was telling you? 7 A. I think on reflection, I think you probably do have to 8 draw that conclusion. I would say, though, that the 9 stuff that we got, the -- the information that we got 10 through from Post Office was often quite comprehensive 11 and full and analytical. So when I look at things like 12 the response to the Panorama programme, the response to 13 the debates, that they put out in public as well, the 14 response to the Second Sight Part Two report, the slide 15 shows -- the 30-page slide show they prepared for 16 Baroness Neville-Rolfe, for example -- it was always 17 quite comprehensive and analytical and I thought well 18 thought through. 19 So I may have shown too much deference but what 20 I perceived at the time was quite comprehensive answers 21 coming my way. It wasn't a sort of one-line brush-off. 22 Q. You said earlier that you think that you, looking back, 23 are guilty of a lack of curiosity. 24 A. Well, yes, I think -- it's self-evident there was a lack 25 of curiosity because, obviously, there was a problem and 28 1 I didn't get to it. So I accept that. But I think that 2 there were times where, you know, I -- I think we were 3 curious, clearly not curious enough but, as I say, we 4 were getting a lot of information from Post Office, and 5 it was pretty comprehensive and analytical and looked 6 well thought through. 7 So you draw a degree of assurance from that. 8 Q. Can I take you to some documents that may help us to 9 understand the relationship between you and Post Office 10 in the provision of information to outside sources. Can 11 we start, please, by looking at POL00100581. Thank you. 12 If we look at the bottom of page 1, please, we'll see 13 an email from Peter Batten to Belinda Crowe, copied to 14 you. Peter Batten was a member of the Shareholder 15 Executive; is that right? 16 A. Right. 17 Q. Was he somebody who reported to you? 18 A. Yes. 19 Q. He emails you and Belinda Crowe on 23 April 2014 and 20 says: 21 "Hi Belinda 22 "Many thanks for your time. Please see attached two 23 draft letters, one that we are proposing to send to Alan 24 Bates, and one to Sir Anthony Hooper (on the assumption 25 that the JFSA is unable to provide a reason for us not 29 1 to forward the letter). 2 "We've included the final paragraph on the letter to 3 Sir Anthony as a means of giving Jenny a future hook 4 into the process (for example in the event that she 5 feels she needs to intervene). I would be grateful for 6 your views on the benefits of including this hook, 7 versus the risks of perceived in infringement on 8 Sir Anthony's independence." 9 If we go to the top of the page, we can see that 10 Ms Crowe of the Post Office replies: 11 "Grateful if we could have a word about handling. 12 (I have also left you a message). 13 "Having had a good opportunity to look at the letter 14 I think that it contains some very significant points 15 which have to be addressed by both Post Office and the 16 Chair of the Working Group." 17 Just on a point of process or understanding how ShEx 18 worked, is it right that it will be normal that ShEx 19 would run drafts of letters that it proposed to send out 20 through the Post Office? 21 A. Not always, no. So it depends on the -- very much 22 depends on the context. 23 Q. So, looking at this exchange, why was ShEx saying "Is it 24 okay, essentially, if we say what we want to say"? 25 A. Because -- so we'd received a letter from Sir Alan 30 1 Bates, I think, on 16 April. Going back to my point in 2 my witness statement about feeling the points of tension 3 between intervening or not intervening, we were very 4 aware that the Mediation Scheme was independent, we 5 understood Sir Anthony Hooper to protect his 6 independence very closely. So I think Sir Alan Bates' 7 letter was, I think, encouraging us to intervene. We 8 didn't want intervene because we felt the Mediation 9 Scheme should play out and we wanted to tell Sir Anthony 10 Hooper. 11 The reason why we ask Belinda is because she was 12 administering and leading the Working Group's operation, 13 and knew, I think, knew Anthony Hooper best, so we 14 wanted her view as to how he would perceive the letter 15 and how best to handle it with him. 16 Q. Did you ever do things the other way round, ie write 17 a draft letter to Sir Alan or to Sir Anthony or any of 18 the subpostmasters and say, "We're proposing to say this 19 to the Post Office, is it okay if we say it"? 20 A. No. 21 Q. So the Post Office were the source of your information 22 and vetted your letters? 23 A. No. They didn't vet the letters. I think we were very 24 sensitive about the Mediation Scheme because this is, 25 what -- 31 1 Q. April. 2 A. -- April '14. You know it's starting -- well, it's 3 definitely started to unwind in the sense that we've got 4 this letter from Sir Alan Bates. But it feels to us the 5 only way to really, still, to resolve a lot of the 6 concerns, and everybody had agreed, I think -- this is 7 before my time -- the Government would just stay out of 8 the Mediation Scheme to the extent possible. So we saw 9 Belinda as a sort of route to test how the Working 10 Group, in particular Sir Anthony Hooper, would want to 11 deal with the situation. 12 Q. Thank you can we look at some other examples, 13 UKGI00002467. Look at the foot of the page, which is 14 the start of the chain. Melanie Corfield sending within 15 the Post Office a letter, a Sparrow letter, to Mark 16 Davies. Then scrolling up, 9 September, Mark Davies 17 sending that letter to you: 18 "Here you go. Let me know what else you need 19 (indeed, does this do enough for you)?" 20 Then scroll up a little. You say: 21 "Sorry, is there also an example of the inaccuracies 22 etc I could use to illustrate the issue? 23 "Cheers, and sigh ..." 24 He replies: 25 "Report claims power loss can lead to data loss and 32 1 thus real loss for [subpostmaster]. Strongly refute 2 that." 3 A. Yeah. 4 Q. So is the context here that -- in fact, you tell us the 5 context? 6 A. So I think the context is that the Second Sight -- the 7 first draft of the Second Sight Part Two review is out, 8 and I think we were providing advice to Jo Swinson. 9 I think -- well, we asked Post Office -- I'm not sure 10 whether we'd asked Post Office to provide a letter to Jo 11 Swinson or whether they'd volunteered one. They would 12 share a draft with me, essentially to check whether it's 13 intelligible and the like, and I think it said at the 14 top of the letter, you know, there are various 15 inaccuracies in the letter -- sorry. 16 The letter was saying that there was inaccuracies in 17 Second Sight's Report and I thought "Well, if I just -- 18 I need to have an answer as to what -- an example of 19 what those are because Jo Swinson will ask, so can you 20 give me an example to substantiate what you're saying, 21 please, Mark?" 22 Q. So why would you go to the Head of Media and 23 Communications for this issue? 24 A. Well, because that team would write the letter because 25 it comes from Melanie Corfield, who was his -- one of 33 1 his team, and say -- 2 Q. So this is about a draft letter from -- 3 A. From -- 4 Q. -- from Post Office to the Minister -- 5 A. To the minister, I think, yeah -- 6 Q. -- and you're intervening and saying it needs beefing 7 up? 8 A. Well, they're writing to us to say "This is what we're 9 going to send", and they would often do that and we 10 would often ask to do that because I think, sometimes, 11 going back to my role as interpreter, sometimes what 12 they thought was clear wouldn't necessarily be clear to 13 Government. So they sort of sent it through -- it was 14 customary for them to send something like that to us, 15 not always, to get my view on it and I -- you know, 16 where I'm saying there, you know, "Your letter is not 17 clear enough can you give an example, so that when Jo 18 inevitably asks me 'What does Post Office mean by 19 inaccuracies in the report', I can say 'Well, what they 20 mean is this'". 21 So it's trying to pre-empt the question, as it were, 22 that I know I'm going to get from ministers because 23 their letter isn't sufficiently clear. 24 Q. So are you here performing the role of a Post Office 25 NED -- 34 1 A. No. 2 Q. -- in seeking to -- 3 A. No. 4 Q. -- put the company's best case to the Minister? 5 A. No, I'd say this is -- I mean, clearly there's a Venn 6 diagram of it but I'd say I'm a Shareholder Team here, 7 looking at what sort of communications the Post Office 8 is sending to the Minister and sort of giving them a few 9 hints and tips that it might be beneficial if they could 10 make it a bit clearer before it goes or I think probably 11 what's going on here is that they've either possibly 12 sent it already and I'm trying to get ready to 13 anticipate the questions I'm inevitably going to get 14 from the Minister. 15 Q. Can we move forwards, please, to December UKGI00002726. 16 This is an email from you to Belinda Crowe and Patrick 17 Bourke forwarding a draft speech, I think, of the 18 minister -- 19 A. Yeah. 20 Q. -- in readiness for the WHD, the Westminster Hall 21 Debate -- 22 A. Yeah. 23 Q. -- that I think was to take place on 17 December 2014. 24 You say: 25 "... thanks for your respective emails. I will take 35 1 a look and amend Jo's speech accordingly but given that 2 I'm about to get in a car for a couple of hours to drive 3 back home I thought this might be expedient to get this 4 off to you now to do a sweep of things we shouldn't say. 5 I hope I haven't gone too far -- the problems is that 6 ideally we wouldn't be having these debate, but as we 7 are Jo has to be able to say something reasonably 8 concrete in response to the accusations. 9 "Thanks to both of you for your help ..." 10 So you're asking them to vet the Minister's speech 11 it, is that right, "to do a sweep of things we shouldn't 12 say"? 13 A. Yes. The context, I would say there, is that (a) when 14 it comes to Parliamentary debates, there was always very 15 close -- a close relationship between Post Office and 16 the ShEx Shareholder Team because the Post Office is at 17 the operational forefront. So to give a non-Sparrow 18 example, you know, a constituency matter around 19 a closure proposal -- excuse me, sorry. 20 A debate around a closure of a particular 21 constituency, Post Office, or redundancies in the supply 22 chain or industrial action, that kind of thing, Post 23 Office can't speak to Parliament, it has to be the 24 Minister. We would therefore verify things and share 25 information and get information from the Post Office to 36 1 be able to facilitate that debate and I think what I'm 2 saying there is "Here's the speech, is there anything in 3 there that we are saying that is sort of either 4 factually wrong", or whatever. So it wasn't be 5 unusual -- 6 Q. So would you routinely seek advice or input from the 7 Post Office on letters to be sent by ShEx? 8 A. Well, this is -- this could -- this is about the speech? 9 Q. I'm talking about -- 10 A. Letters -- 11 Q. -- looking at the run of things -- 12 A. Oh, I see so not necessarily. No. Most of the time our 13 letters wouldn't be run past Post Office, although that 14 said, we would have standard stock responses for things 15 like a Post Office closure -- 16 Q. Okay, I'm going to have to try and -- 17 A. Speed me up? 18 Q. No, definitely not speed you up! 19 A. Sorry. 20 Q. Ask you to try to constrain your answers -- 21 A. Okay. 22 Q. -- more directly to the questions I'm asking. 23 A. I'm just -- sorry, yeah, fair enough. I'm just saying 24 it's not unusual, it was standard practice to share some 25 things with Post Office. Usually, they were standard 37 1 texts which we wouldn't have to share with Post Office 2 because we already had a shared agreement as to what we 3 were saying. 4 Q. On debates? 5 A. On debates we would usually share that sort of text and 6 indeed they would come in and talk to the Minister about 7 the debate. It was very close because they're at the 8 forefront of the operational side of things, which is, 9 generally speaking, what the debates are concerned with. 10 Q. What steps did you take, if any, to verify the lines 11 given to you by Post Office? 12 A. I think it depends on the line. So we wouldn't just -- 13 if they made a change, we wouldn't just accept it. The 14 lines and the speech would be our speech but we're 15 checking what their -- whether they've got any views on 16 it. 17 Q. How would you seek to verify the lines that the Post 18 Office was giving to the Minister to take either in his 19 speech or in correspondence? 20 A. Well, we wouldn't always verify it because it depends on 21 what it was. If -- 22 Q. On the occasions on which you did seek to verify it, how 23 would you go about that? 24 A. I don't know, to be honest. I suppose a lot of it would 25 be just probing and asking a sort of second level or 38 1 third level question, in response to what they've said, 2 to sort of try and understand the response. I mean, 3 there would be rarely sort of backing documentation to 4 this sort of stuff. It would be a view where you'd be 5 asking "Are you sure? You say this but how about that?" 6 Q. Can we move forward, please, to January 2015 and look at 7 UKGI00002996. If we scroll to the bottom of the page, 8 please. An email from you to the "Swinson MPST", is 9 that a generic email address for Jo Swinson's office? 10 A. That's her office. 11 Q. Private office, is it? 12 A. Yes, it goes to four or five people who are in her 13 office. 14 Q. You say "Alysa", who presumably is someone in her 15 private office; is that right? 16 "... further to my updates on the Horizon scheme, 17 note it looks as if BISCom are inviting [subpostmasters] 18 and [Post Office] to sessions on 3 February. I suggest 19 that Jo stays clear of this if she can given that this 20 is an independent scheme, but I suppose she might 21 inevitably be drawn in. 22 "I haven't talked to [Post Office] about this yet so 23 will keep you posted. I would be grateful if you could 24 provide us with Jo's views following my email of 25 yesterday as clearly this may have handling implications 39 1 for [Post Office], although instinctively it feels that 2 the more conciliatory we are on this, the more the JFSA 3 get to try and widen the scope of the scheme to find 4 a smoking gun which does not exist." 5 Then you forward this up to the page to Laura 6 Thompson, what role did she perform? 7 A. She had just joined the team. 8 Q. The ShEx team? 9 A. Yes, taking over from Peter Batten, who was the prior 10 person looking after Horizon for me. 11 Q. Saying that she: 12 "Better get up to speed on Horizon!!! So far we 13 have not been sucked in, but it's probably only a matter 14 of time." 15 Is that how you viewed matters at the time? 16 A. Well, you could feel the pressure building. We'd spent 17 a year trying not to -- to keep this as an operational 18 matter for Post Office and the pressure was building 19 that we might be required to intervene. 20 Q. What do you mean by the suggestion that the JFSA were 21 trying to find a smoking gun which does not exist? 22 A. By that time, a lot of the mediation investigations had 23 been done. We hadn't heard of any specific problem with 24 Horizon that caused losses to subpostmasters, and there 25 was a -- there was a-- Second Sight were expanding their 40 1 scope of work, and I thought that might be because they 2 hadn't found the issues they were expecting to find with 3 the Horizon scheme and therefore they'd be widening 4 their scope because they hadn't found the smoking gun, 5 which is the bug that creates the losses. 6 Q. The words that you use appear to suggest, would you 7 agree, that you had formed the view that there would be 8 no smoking gun found in relation to problems with 9 Horizon system? 10 A. I think by that time I probably had. At least on the 11 balance of -- strongly on the balance of probabilities 12 that that is the -- that's the view I'd taken. 13 Q. Did that mindset pervade your thinking and affect your 14 actions -- 15 A. I think -- 16 Q. -- not only has one not been found, one will not be 17 found? 18 A. Yeah, because over the -- I think that's probably right. 19 Over the course of time, the longer -- you know, another 20 year had gone by of investigations. In particular, 21 investigations of people's cases that had said there is 22 a problem, been looked at by Post Office, looked at by 23 Second Sight, we hadn't heard of a particular bug 24 causing the loss. So my emerging conclusion was, yes, 25 there isn't an issue and it did colour my view, going 41 1 forward from around that point. 2 Q. Why were you so sure that the smoking gun did not, in 3 fact, exist? 4 A. Well, as I say, there'd been, I think, by that point 5 almost two and a half years of investigation, including 6 by Second Sight, and they hadn't found -- and they'd 7 looked at -- 8 Q. "Including by Second Sight", who had been the other 9 investigation? 10 A. Well, by Post Office, so Post Office had looked, and -- 11 Q. How had they looked? 12 A. Well, sorry? 13 Q. What investigation had they conducted? 14 A. Oh, well, so as part of the Mediation Scheme, Post 15 Office had a team of 20 people that would be looking at 16 the each individual case. That case was referred to 17 Second Sight to also investigate. So you'd had two sets 18 of investigations with the first -- 19 Q. Is that how you viewed it? There were two 20 investigations going on here? 21 A. Yeah, that's how I viewed it. There were two 22 investigations going on, one of which is independent, 23 the latter one, Second Sight. I, you know, trusted the 24 first one, the investigations done by Post Office and -- 25 Q. Why were you so credulous when it came to reassurances 42 1 from Post Office and yet so disbelieving of what the 2 subpostmasters and the MPs were telling you? 3 A. Because I suppose it's from the point of view that I was 4 looking for a bug in the Horizon system that created 5 losses, with a direct link, I thought that's what 6 everybody was looking for, rightly or wrongly. That's 7 what I was sort of looking for. 8 Q. Just stop there. Why were you looking for that? 9 A. Right, because that's what I thought the case was about, 10 that there were -- and it's often even said now in the 11 media today, there are bugs in Horizon. I thought we 12 were looking for bugs in Horizon that, therefore -- that 13 were unknown to Post Office and that they were causing 14 losses to the subpostmasters. I was looking for 15 a causation of -- finding an unknown bug that hadn't 16 been previously known about that caused the loss at the 17 subpostmaster end. 18 And, by this stage here, in February '15, as I -- 19 I'd understood that that sort of investigation had been 20 going on in one form or another for two and a bit years 21 if not two and a half. So over that time, that's what 22 gave me -- I won't say confidence but it gave me the 23 feeling that there wasn't a smoking gun knocking around 24 and that's why, rather than the JFSA widening the scope, 25 that's why I felt that Second Sight really were seeking 43 1 to widen the scope because they hadn't found any 2 particular problems with the individual cases where they 3 were saying there was an issue. 4 Q. Can we turn to the issue of obtaining information from 5 the Post Office and look at UKGI00002292, an email from 6 you to Peter Batten of 1 May 2014. 7 A. Yeah. 8 Q. If we just scroll down a little bit, thank you. In the 9 last paragraph -- I'm going to skip over the substance 10 if I may -- you say: 11 "... I hope I haven't crossed a line by saying Tim 12 mentioned you were worried that I apportioned some blame 13 to the team for the press notice stuff." 14 So I think this part is about a press notice. I'm 15 not sure exactly what it's about. You continue: 16 "I just want to be clear that I don't at all -- it 17 has however taught me a lesson that I need to push 18 harder on [Post Office] to get things done, I have been 19 too reliant on their promises to deliver, which has been 20 an error on my part. We do however need to be realistic 21 as well -- our view and their view will often be 22 different ..." 23 A. Yeah. 24 Q. "[And we're going to have to] pick our battles." 25 A. Yeah. 44 1 Q. What's the context of this; can you remember? 2 A. I honestly can't remember. I think it's something to do 3 with number 1 about -- because it's a press notice: Mark 4 Davies and I think Becky Barrow was a journalist of some 5 description. But I honestly can't remember the -- 6 Q. You said that you had been too reliant on Post Office's 7 promises to deliver. 8 A. Yeah. 9 Q. Other than in this context, was that a theme of your 10 work over the four years that we're looking at? 11 A. Um -- 12 Q. Did you feel that you were over-reliant on them? 13 A. That I was overreliant? Well, I was reliant on them, 14 I don't think I was overreliant on them. I mean, it 15 depended on what the issue was. But in terms of comms, 16 which I think this is about, it's about relying on them 17 to do it in a way that we felt appropriate, I think. 18 I can't really remember, I'm afraid. 19 Q. Can we turn to POL00158108, please, and look at page 3, 20 please. Scroll down. Keep going. 21 Yes, we can see this is signed off by Neil 22 Hayward -- 23 A. Yes. 24 Q. -- Group People Director. Do you remember the function 25 that he performed? 45 1 A. Yes, he was People Director, like HR Director. 2 Q. If we go up, please, and keep going. Thank you. Just 3 a little bit further. I think we can see from the reply 4 here that I think Mr Hayward's email went to, amongst 5 others, Paula Vennells? 6 A. Yes. 7 Q. Okay, if we scroll back down to the beginning part of 8 his email. So February '14: 9 "[For your information] -- I recently met with 10 Richard [that's you] during his induction and mine to 11 the Post Office. 12 "He provided me with some insight on the things that 13 interest him ... I thought I should share what I learnt 14 ..." 15 Scroll down, please: 16 "The Post Office is hugely politically important. 17 Whilst it is probably the third biggest of the [around] 18 20 or so businesses being managed through Shareholder 19 Executive, it carries the highest profile. Everything 20 that we do has the potential to create issues for 21 ministers. This is partly why he/they will always ask 22 us detailed questions. He also explained that [the] 23 Treasury applies pressure to ensure that the investment 24 in the Post Office is doing what we/they said it would 25 do." 46 1 Would that record of what you were said to have said 2 be accurate -- 3 A. I can't really remember but -- 4 Q. -- ie the content? 5 A. Yeah, that's probably something I might well have said. 6 Q. If we scroll up to page 1, please. Ms Vennells' reply: 7 "... see the note below." 8 She's forwarding this to Alice Perkins. Scroll down 9 to the direct reply, she says: 10 "Richard [that's you] asks the right questions." 11 Then in the next paragraph: 12 "Richard has the job of making sure the Government 13 gets a return ... We are in the delivery phase and 14 (within BIS) he is accountable. We need to make him 15 comfortable and confident that we will deliver what we 16 set out to." 17 Then scroll on a little bit, please, three 18 paragraphs from the bottom there: 19 "Richard's scope has not yet picked up Sparrow or 20 Business Transformation. It will as he is attending 21 next week's Board meeting. But as this is the case, 22 I suggest we leave them off the ShEx review agenda as he 23 will be well briefed by then." 24 So looking at this exchange generally then, at the 25 time that you joined Post Office as a NED and took over 47 1 as the lead on the ShEx team, was it the case that Post 2 Office carried the highest profile amongst all of the 3 businesses managed by ShEx? 4 A. I think so, yes. 5 Q. How did the political importance of the Post Office 6 impact on the nature and extent of ShEx's and 7 ministerial interest in Post Office? 8 A. Sorry, can you explain the question? Sorry. 9 Q. Yes. How did the political importance of the Post 10 Office, which is explained or described in this exchange 11 here, impact on the nature and extent of ShEx's 12 involvement in or oversight of Post Office? Did make it 13 different from any of the other 19 businesses? 14 A. No, it's not a question of degree but there was always 15 interest, politically, both from ministers but because 16 of interest in Parliament and the media around what Post 17 Office was doing, whether it be its Network 18 Transformation, whether it be putting Crown Offices into 19 WHSmith. Anything and everything always seemed to 20 create a lot of media attention and Parliamentary 21 attention, which just meant there was a lot of scrutiny. 22 Q. Mr Hayward said that you wanted to get underneath the 23 surface a bit, you'll remember, in that email? 24 A. Mm-hm. 25 Q. What did you do to get under the surface a bit -- 48 1 A. Well -- 2 Q. -- in practical terms? 3 A. In practical -- well, we were on the phone to Post 4 Office and emailing Post Office practically every day 5 about every different, you know, overwhelming number of 6 issues. So anything from tearing apart their funding 7 plan to understanding the latest they were having with 8 a particular issue. So it was a constant stream of 9 areas that we would discuss with them, from industrial 10 relations to closing the pension scheme, to particular 11 constituency -- sorry, particular Post Office closures 12 or changes. 13 There were very -- there was a mix of very macro and 14 micro issues constantly coming our way that we were 15 interested in and we would go and ask them questions, we 16 would go and visit them, we would get on the phone, we 17 would send them emails and we would try and get 18 satisfied with what they are telling us. 19 Q. Was there a document which told businesses which ShEx 20 managed and oversaw what Government expects of it? 21 A. I'm not sure there was. I mean, there are framework 22 agreements and articles of association and those sorts 23 of constitutional structures, and there are Chairman's 24 letters or letters to the Chair and those sorts of 25 things. So it depends on the company. 49 1 Q. Could we look, please, at UKGI00044314. This is part of 2 the ShEx handbook; do you remember that? 3 A. Only vaguely. I remember it being written when 4 I arrived in 2007. 5 Q. Was it not a document which, being a handbook and 6 everything, that people might have recourse to? 7 A. Not particularly, no. I don't recall it really being -- 8 out of the first few months of it being in existence, it 9 didn't really get, from memory, really get rolled out. 10 I mean, when I saw it, I was like "Oh, I remember what 11 that was", but I don't recall it particularly being 12 rolled out as something that everybody had as 13 a handbook. 14 Q. Was it, even when limitedly rolled out, something which 15 businesses which ShEx managed were directed to or given 16 a copy of? 17 A. I don't think so. I think it was internal but I don't 18 know for sure. I mean, it may well have been at the 19 time. 20 Q. Can we look at page 3 please. This is in the section of 21 "Corporate Governance". If we scroll down, please. 22 Just go back to page 2, please, and then page 3., and 23 scroll down, and over the page. Thank you. 24 The heading, "What Government expects of its 25 businesses". 50 1 A. Yes. 2 Q. In order for this to be effective, presumably the 3 business would have had to have been given this? 4 A. I can see why you'd say that. I'm not sure if it ever 5 was and I think that would be more around the idea that 6 the Shareholder Team would -- this is what the 7 Shareholder Team should expect of its business in -- 8 Q. But you don't tell the business about it? 9 A. But I don't think you tell the business about it, no. 10 Q. That seems slightly odd, if I may say so, Mr Callard? 11 A. Yes, but I think you're placing reliance on a single 12 internal document that was done in 2007, which by 2014 13 things had moved on. I mean -- 14 Q. Was this updated then? 15 A. I don't know, I don't think it was. For example, it 16 doesn't mention -- and it's on page 2, it doesn't 17 mention having a Shareholder NED because time had moved 18 on. So I think this -- I don't know what happened to 19 it, to be honest. 20 Q. I've been looking for a document that emanated from 21 Government that would be passed to a business, telling 22 the business what it, Government, expected of it -- 23 A. Yeah. 24 Q. -- in terms of general principles -- 25 A. Yes. 51 1 Q. -- of governance, and this is the closest I've been able 2 to find. You say that this would have been an internal 3 document, even though it set out expectations of 4 businesses managed by ShEx and may not have been passed 5 to them? 6 A. Well, I can't remember what happened to that document. 7 Clearly, times have moved on but I think the stuff 8 there, looking at it, is stuff that you would expect 9 a business that you are the shareholder of to be doing 10 anyway. 11 Q. So: 12 "Businesses" -- 13 A. Should be open -- honest, open -- sorry. 14 Q. -- "should seek -- an honest, open and ongoing dialogue 15 with the Government as shareholder. They should clearly 16 communicate the plans they are pursuing and the likely 17 financial and wider consequences of those plans." 18 Principle 1. 19 "Principle 2. Businesses should operate a 'no 20 surprises' policy ensuring that the Government as 21 shareholder is informed well in advance of anything 22 potentially contentious in the public arena." 23 A. Yeah. 24 Q. Then: 25 "Principle 8. Businesses should have and continue 52 1 to develop coherent strategies for each business unit. 2 The approach to reviewing strategy should be a dialogue 3 between the Board and the shareholder." 4 A. Yes. 5 Q. You say that these are essentially -- have I got you 6 right -- so obvious that a business ought need to be 7 told about them? (sic) 8 A. Yes, I guess so. I mean, I don't -- you know, I was -- 9 at this time, when this came out, I was an assistant 10 director. So I don't know quite what happened and why 11 this sort of phased away and I've no idea what happened 12 to Principles 3, 4, et cetera. But yes, I think you'd 13 expect, and we would expect as a shareholder team, 14 business to -- businesses to operate that. That's kind 15 of the culture that we would expect a business would 16 have and that we would operate, and then -- on the 17 understanding of. 18 Q. So when you joined in 2014, were you aware of any of the 19 following: that the Post Office had known about a whole 20 series of bugs, errors and defects in Horizon that had 21 existed right from its inception since 2000? 22 A. No. 23 Q. That that included the Falkirk bug from 2006? 24 A. I think what I understood was the Second Sight advice, 25 which had two bugs, mentioned two bugs -- 53 1 Q. One of which was Falkirk -- 2 A. Right, okay. 3 Q. -- is that right? 4 A. I can't remember, I'm afraid. So I knew that there 5 was -- the position I understood, as I came into the 6 role, was that there was no systemic failures, given 7 there's probably a discussion about what that really 8 means, and then there were two known bugs. But my 9 understanding was that those -- that the losses caused 10 by those bugs had been corrected by Post Office and the 11 subpostmasters didn't lose out. So that was my 12 understanding of the extent of bugs. 13 Q. Were you ever told that it, the Post Office, was in 14 possession of expert reports as a result of civil 15 litigation that it had engaged in, in 2004 and 2006, 16 which challenged the proposition that Horizon was 17 robust? 18 A. No. 19 Q. Were you ever told about the previous acquittals of 20 subpostmasters, each of whom had raised the defective 21 operation of Horizon as part of their defence. The 22 names included: Suzanne Palmer, Maureen McKelvey and 23 Nichola Arch? 24 A. No. 25 Q. Would you expect to be briefed about that kind of thing? 54 1 A. Yes. 2 Q. By whom? 3 A. Anybody that was talking to me about Sparrow. 4 Q. I mean, they were issues that were relevant to -- or 5 they were matters that were relevant to issues in the 6 Group Litigation -- 7 A. Right. 8 Q. -- would you agree? 9 A. Well, yes, they're certainly relevant. 10 Q. Whether Horizon was robust and whether subpostmasters 11 had been liable under their contracts for alleged 12 shortfalls. To whom do you attribute responsibility for 13 the Government not being informed of such matters? 14 A. That's hard to say because those matters are quite 15 historical. So I don't know who would be -- whether it 16 would be the Legal Team that should have that on file 17 and should tell people about it. 18 Q. Was ShEx ever made aware of the Simon Clarke Advice in 19 relation to the credibility of the Post Office's main 20 expert witness, Gareth Jenkins? 21 A. No, the first time I learnt about the Clarke Advice was 22 in the sort of fallout of the GLO, I think. 23 Q. Sorry, you learnt about I in the context of the GLO? 24 A. Yes, when it got raised in the GLO, that there was 25 advice -- the Clarke Advice, that was -- 55 1 Q. Can you tell us a bit more about that? 2 A. Oh, well, it was just -- I think -- 3 Q. Because, as far as we know, the outward-facing 4 disclosure of the Clarke Advice didn't occur until 5 November 2020, in the context of the criminal appeals? 6 A. Okay, so maybe when I say GLO, I mean the legal cases 7 that happened after me. Sorry, I don't mean 8 specifically -- well, I -- I don't understand the 9 nuances between the different cases but, as part of the 10 findings against Post Office, I heard about the Clarke 11 Advice, but that's the first time I'd heard about it. 12 Q. You've seen it now? 13 A. It was in my bundle. 14 Q. Yes. Is that the kind of, in the light of the questions 15 that you were asking and the things that the Post Office 16 was saying publicly, is that the kind of document that 17 you would have expected to have been provided with or 18 the contents summarised to you? 19 A. Yes, and I would expect the Board to have been 20 provided -- before I got there, the Board to have been 21 provided with it immediately, given the Board then was 22 looking at prosecutions and the safety thereof. 23 Q. Of course, the duties set out here, or the expectations 24 set out here, cut both ways, don't they? There was 25 a duty on ShEx to exercise a degree of professional 56 1 curiosity and scrutiny; is that right? 2 A. Yes. 3 Q. You said that you accept personally that, on reflection, 4 you were insufficiently curious? 5 A. Yes, I think that's self-evident because I didn't get to 6 the bottom of it. 7 Q. Is that the basis on which you say you were 8 insufficiently curious, ie that, in fact, there were 9 things that you did not discover, or is it a more 10 nuanced reflection on what you, in fact, did or didn't 11 do? 12 A. Well, I think that it's -- it's probably both. I mean, 13 clearly I'm one part of this but I -- it's difficult to 14 know what to ask, if you don't know about it. So you 15 can't go and ask "Well, is there any evidence that 16 you've got that prosecutions aren't safe?", when it's 17 been present to Board before you've got there that 18 prosecutions are safe and that was set out by 19 an independent firm and a KC. 20 You take -- you have to take assurance from the 21 independent advice that's been given to a Board before 22 you get there. 23 Q. When you were first appointed as Shareholder NED, what 24 was your understanding of Post Office's investigatory 25 and prosecutorial functions? 57 1 A. There'd been quite a comprehensive discussion in the 2 February Board about the new Prosecution Policy and that 3 paper contained a reasonable amount of detail about the 4 history, in addition to the forward look about the new 5 policy. So I was aware quite early on that Post Office 6 bought prosecutions, I don't think I understood the 7 nuances of that, of being prosecutor, victim, 8 investigator. 9 Q. In your witness statement you say -- and for the note 10 it's paragraphs 273 and 329 -- that you understood that 11 there had been a review in 2013 by Cartwright King and 12 Brian Altman QC which had been reassuring, and: 13 "The comfort I took from what I understood to be 14 a thorough review by Cartwright King and Brian Altman QC 15 was clearly misplaced. I had never heard directly from 16 any of the affected subpostmasters on the issue of past 17 prosecutions." 18 You say that you and the Board were not provided 19 with a copy of Mr Clarke's Advice of 15 July 2013. 20 At the time that you were told about the Cartwright 21 King review, did you understand that, to an extent, it 22 was marking its own homework, ie reviewing prosecutions 23 which it itself had brought? 24 A. I don't think that occurred to me. I mean, I learnt of 25 it in the first Board that I observed -- I wasn't 58 1 a member and I was still getting to grips of all of the 2 things of Post Office. I wouldn't have thought too 3 deeply about that paper. 4 Q. So is the comfort that you took, hearing the words that 5 a firm of solicitors and a QC have undertaken a review, 6 and the outcome of it was reassuring -- 7 A. Well, I -- 8 Q. -- is that as far as it went? 9 A. Well, I took comfort from the Board. I mean, the Board 10 that I'd joined had had that advice, was broadly 11 comfortable with it and whenever -- you know, the focus 12 of the Board thereafter tended to be around the 13 Mediation Scheme, not past prosecutions. So I didn't 14 just take comfort from the paper that I read; I took 15 comfort from the fact that the rest of the Board -- it 16 didn't seem to be an issue that the rest of the Board 17 were vexed about, so I took my lead from that. 18 Q. Did you ever receive any copies of legal advice that 19 Post Office obtained during your time either as 20 Shareholder NED or as ShEx? 21 A. I can't remember. I may have done but I can't think of 22 any instances. 23 Q. So you can't recall any instances where you actually 24 read the advice, rather than what Post Office said was 25 in the advice? 59 1 A. I can't think of any instances. Not saying there 2 weren't any, but -- 3 Q. Did you ever request any copies of the primary material 4 itself, ie what the actual lawyer actually said? 5 A. Well, I can't think of an instance that -- outside of 6 the Sparrow situation -- where there was legal advice. 7 Hold on, sorry. Wait a minute. I may have seen some in 8 relation to the procurement -- reprocurement of Fujitsu. 9 I guess the Linklaters advice of March '15 is legally 10 privileged. I mean -- so yes -- so I will have seen 11 some. 12 Q. Was there a prohibition, to your understanding, on Board 13 members seeing the legal advice itself? 14 A. Not that I understood but I've since seen evidence from 15 others, such as Tim Parker, where that has happened. 16 I didn't understand there to be a prohibition. 17 Q. Was that ever the subject of discussion, ie Board 18 members saying, "We actually want to see what is said by 19 our legal adviser, rather than what somebody says the 20 legal adviser has said"? 21 A. I don't recall that ever being discussed. 22 MR BEER: Thank you. 23 Sir, it's just after 11.05, I wonder whether we can 24 take our first morning break until 11.20 past, please? 25 SIR WYN WILLIAMS: Yes, of course. 60 1 MR BEER: Thank you very much, sir. 2 (11.08 am) 3 (A short break) 4 (11.20 am) 5 MR BEER: Good morning, sir, can you continue to see and 6 hear us? 7 SIR WYN WILLIAMS: Yes, thank you. 8 MR BEER: Mr Callard, can you move right forward and aim 9 both microphones at your mouth, please. I've been told 10 that those listening online have sometimes encountered 11 difficulty in hearing you. 12 A. Right. 13 Q. Thank you. Is it right that one of the key roles of 14 ShEx was to identify risks in relation to each of its 15 assets? 16 A. Yes. 17 Q. Is it right that ShEx maintained a monthly risk 18 register? 19 A. For each asset, yes. 20 Q. Is it right that the completion of that risk register on 21 a monthly basis didn't simply entail recording the 22 business's own assessment of risk but was in fact ShEx's 23 own assessment of the risk? 24 A. That's right. 25 Q. As the person who led the Post Office Shareholder Team, 61 1 was it ultimately your responsibility to ensure that the 2 risks were (a) properly recorded -- 3 A. Yes. 4 Q. -- and (b) adequately assessed? 5 A. Yes. 6 Q. Was it, therefore, your responsibility to ensure that 7 you and your team had sufficient information in order 8 properly to record and assess risk? 9 A. Yes. 10 Q. Can we look at some examples across the years, please, 11 starting with 2014, by looking at UKGI00002515. 12 This is the risk register for 13 February 2014. So, 13 just for some context, that is seven or eight months 14 after the publication of the Second Sight Interim Report 15 and, as we now know, at a time when the Post Office was 16 aware of problems connected with Mr Jenkins' evidence in 17 criminal prosecutions and at a time when advice was 18 being sought externally from the likes of Cartwright 19 King and Brian Altman KC. 20 A. Could you just scroll down? I was looking at this last 21 night, so -- 22 Q. To which line? 23 A. Well, where you are now. I'm not sure whether it -- 24 because the date should be in the top right-hand corner, 25 where it says, "TBC". 62 1 Q. If we go to title and guide, so bottom left. 2 A. Yeah. It's just the reason why I'm saying that is 3 because the person that's got the -- one of the risks 4 around the Post Office Card Account is Leonie Lambert, 5 who joined the team at the end of 2014. 6 Q. So what's the point that you're making -- 7 A. Well, because you're saying that it's a February '14 and 8 I'm saying it's probably eight months beyond February 9 '14. 10 Q. So -- 11 A. Or -- 12 Q. -- this is a document that UKGI sent us? 13 A. Yes. 14 Q. It's got on it, can you see, "Last updated 13 February 15 2014". Can you see that? Third box down, "Last 16 updated" -- 17 A. Yes, I can. Yes, I can. 18 Q. Are you saying that's wrong? 19 A. I'm not sure but I know there was a different person -- 20 if we're dealing with February '14 there was a different 21 person in charge of some of those risks at the time, so 22 I'm not entirely sure of the date. So the risks though 23 broadly are probably similar to what they were in 24 February '14. 25 Q. So if we go back to risk register, thank you, and can 63 1 you point to the person -- 2 A. So Government digital transformation, that was Leonie 3 Lambert, and the Post Office Card Account, risk 6, 4 Leonie Lambert. She joined the team, I think, towards 5 the back end of 2014. It was, prior to that, Katrina 6 Lidbetter that would have looked after those things, she 7 was there as the Government Services person when 8 I joined the team. 9 Q. So what does that mean for us then -- 10 A. Well -- 11 Q. Hold on. 12 A. Sorry. 13 Q. We shouldn't rely on the dates on the UKGI risk 14 registers as being true? 15 A. To be honest, I don't know, actually, what it means. 16 All I was saying was, because you were putting it in the 17 context of it's February and it's X number of months 18 after Second Sight. I'm saying it's not. I think it's 19 actually perhaps a little bit beyond that. So that's 20 all I'm saying. In case you -- 21 Q. Yes, I mean, I'm not challenging you. 22 A. Yes. 23 Q. I'm seeking to understand what reliance this Inquiry can 24 place on UKGI's documents. I mean, if we look, for 25 example, at line 7, if we scroll down, there's an entry 64 1 there with -- and the third part of column B -- just one 2 to the left if you put the cursor one to the left, 3 that's it -- can you see it says "13 February 2014, 4 terminated 1 October 2014", which tends to support the 5 point that you're making. 6 A. Yes, yes. 7 Q. So -- 8 A. I don't know -- 9 Q. -- how should we treat these documents? 10 A. Well, I don't know. I can only imagine that 13/02 in 11 each of those is the date that risk was created. 12 Q. Going back to "Title and guide", page 1? 13 A. Yes, I noticed. Yeah, I get that. 14 Q. That says, "Last updated". 15 A. I know. 16 Q. Because, obviously, the risks changed sometimes? 17 A. Yes, no, I get that entirely but I'm just pointing out 18 that what date that document comes from. I think "last 19 updated" -- I don't recall us ever really updating the 20 first page because the interesting bits are on the 21 second page. 22 Q. So where it says, "Last updated", you don't recall that 23 ever being updated? 24 A. No, I don't -- in fact, I'm not sure whether they even 25 come around with that "Title and Guide" page on any 65 1 more. They just come around as the risk register. 2 Q. Just going back to the risk register, then, please? 3 A. Sorry, if I'm causing some confusion. 4 Q. No, it's not. It's just the extent to which we can 5 place reliance on the documents that are given to us. 6 We shouldn't treat this as a document which accurately 7 records the risks as the ShEx saw them on 13 February 8 2014? 9 A. Yes. 10 Q. Some of the text may have been inserted after that date? 11 A. And the ratings may have moved around a bit. 12 Q. Given that this was done on a monthly basis, if we look 13 for the March one, oughtn't that to be the place to 14 update it, rather than updating the February one? 15 A. Well, I -- this is probably the -- you know, this is, 16 I would imagine it has been updated in March and April 17 and February and -- until we get to October, and then 18 this is the October view, as it turns out to be. 19 Q. I see. 20 A. Yeah. 21 Q. So we should search through the document and look for 22 the latest date that there's an entry on it and we could 23 say confidently that it has been amended at least at 24 that time? 25 A. I've seen plenty of risk registers that are in my bundle 66 1 which have the top right date put on them and that's 2 what should have happened, I don't know why it wasn't -- 3 why it happened. I mean, these risk registers came in 4 around about February, which is why all those entries 5 are created then, I think. So people were still getting 6 used to populating them and possibly didn't populate the 7 top right-hand ... 8 Q. Was the purpose of the risk register to act as a tool to 9 provide a snapshot of known risks, to provide a tool to 10 ensure prompt oversight and discussion of risk 11 management on an ongoing basis and then to provoke 12 action as a result? 13 A. Yes, it provided an opportunity for the team to think 14 about risk and to communicate risk sort of into the 15 centre of ShEx. 16 Q. Is that right, an opportunity to consider risk and to 17 communicate what the risk was, rather than do anything 18 about it? 19 A. Well, inherently, we were doing stuff about all of these 20 risks. I mean, we wouldn't write risk down and then not 21 deal with it (unclear) steps to deal with it. 22 Q. So the act of assessing and then recording the risk was 23 a tool to ensure action was then taken? 24 A. Yes, because what you would tend to do on these sorts of 25 risk registers, the risk would stay the same. The 67 1 mitigations would move around a little bit, but 2 generally speaking the change would be in the far 3 right-hand column of "Current status", which is 4 essentially saying this the latest and it would either 5 set out what we've done or what is happening. 6 Q. Can we look at lines 55 to 57, please -- thank you -- 7 and risk number 11, which is Project Sparrow. 8 Mr Batten's name underneath it, is that the lead on the 9 risk or the owner of the risk? 10 A. He's the -- essentially, the person leading the work on 11 it so if there was ever a Sparrow issue I would turn to 12 him and ask him to do the work, in the same way, if it 13 was the Mail's contract above, I'd ask Tim to do that. 14 Q. If we look under Sparrow, it's quite difficult to read 15 because the words "Page 2" are printed over the top of 16 it, but just reading along all of lines 55 to 57, so the 17 entirety of the risk numbered 11, there doesn't appear 18 to be anything that addresses that one of the risks that 19 had arisen was that Post Office may have prosecuted 20 individuals wrongly on the basis of data which lacked 21 integrity, does there? 22 A. No, that's right. It doesn't. 23 Q. If we look at the fourth column along, so -- I'm 24 sorry -- the fourth one with writing in it, which 25 I think is column K. 68 1 I'm so sorry, I mean column F. Thank you. That's 2 the one. 3 Can you see that the type of risk is recorded? 4 A. Yes. 5 Q. It's record as being a reputational risk, a finance risk 6 and a people risk. It doesn't record the existence of 7 a legal risk. Do you know why that would be? 8 A. I don't. Is legal an option? 9 Q. I don't know. 10 A. Well, the dropdown box would tell you. 11 Q. Well, ought it to be an option? 12 A. Well, if that was -- I suppose so, yes. 13 Q. And -- 14 A. Although -- sorry -- the risk register would often be 15 about the risk to ShEx, as much as the risk to the -- 16 Q. Well, I was going to come to that question ultimately, 17 in a moment -- 18 A. (Unclear) 19 Q. -- but you might as well address it now as you've 20 mentioned it. Which organisation did the risks recorded 21 on this document relate to? 22 A. The risks should relate to ShEx. What would often -- 23 and UKGI. What would often happen is that inherently 24 the risk to the organisation would sort of creep in and 25 it would get conflated because, if something at the 69 1 organisation goes wrong then, essentially, ShEx has to 2 deal with the fallout of that. So, in this case, it 3 might have reputational risks for both Post Office but 4 also for -- largely for ShEx, in terms of having to deal 5 with the issues that are involved with it. 6 Q. If you just look at the next column along, sort of G, H, 7 I and J, which is the RAG rating boxes; can you see 8 those? 9 A. Yes. 10 Q. The probability of the risk eventuating, the impact of 11 the risk if it does happen, and therefore the rating of 12 the risk, can you see that this risk rating rates 13 Project Sparrow overall as having a risk rating of 9, 14 which I think is the lowest or one of the lowest risks 15 identified in this document? 16 A. I can see the -- a 9, yes. 17 Q. Did that reflect the contemporaneous assessment of the 18 risk to both ShEx and to the Post Office that Project 19 Sparrow was low risk? 20 A. I think that it reflects, yes, where we had got to in 21 terms of our thoughts around the investigations that had 22 happened by that point but it's also put in -- it's 23 relative to other risks which we perceive to be higher. 24 So, for example, 10, above it, is perceived to be very 25 high because there were existential threats perceived to 70 1 Post Office in its relationship with Royal Mail, which 2 it was -- which it was very reliant on. 3 Q. I think what's supposed to happen is each numbered risk 4 is then meant to be translated into a box or a circle -- 5 A. Yeah. 6 Q. -- that appears on the heatmap; is that right? 7 A. I think at that stage we used to summarise the top six, 8 so you'd only put the top six circles on. 9 Q. I was about to say: is that why Project Sparrow doesn't 10 even make it on to the heatmap? 11 A. Yes, because there are six other risks perceived to be 12 higher. 13 Q. So risk 11 doesn't make it on to our heatmap at the top 14 there? 15 A. That's correct. 16 Q. Would you agree there appears to be no mention, either 17 in the text or otherwise, of the possibility that the 18 Post Office may have prosecuted individuals and those 19 prosecutions may have resulted in unsafe convictions? 20 A. Yeah, well, on reflection, yes, that should have been -- 21 Q. There's no risk mentioned that Horizon might lack data 22 integrity, which could undermine the functioning of the 23 business, is there? 24 A. No, and I think that that's -- well, I can speculate why 25 that is but, no, I agree. 71 1 Q. In fact, Sparrow is perceived not to pose any legal risk 2 to the Post Office or ShEx. Such risk as it does pose 3 is reputational, financial and people. In column E, the 4 risk recorded is reputational and brand risk due to 5 a perception; is that how things were seen? 6 A. Well, because it's -- the impact of risk, it's talking 7 about the risk of the Working Group failing. 8 Q. Do you think the things that I've mentioned counters 9 omissions? 10 A. On reflection, knowing what I know now, yes, I would 11 agree. 12 Q. Do those omissions reflect a rather cursory and limited 13 nature of the assessment of risk being undertaken? 14 A. No, I disagree with that. 15 Q. The Post Office had focused significant attention on 16 Horizon issues during the work of Second Sight, hadn't 17 it? 18 A. It's what, sorry? Say that again? 19 Q. The Post Office had focused significant attention -- 20 A. On the -- 21 Q. -- on Horizon, in the course of the work of Second 22 Sight -- 23 A. That's correct. 24 Q. -- and, at this time, was still undergoing a review of 25 past criminal convictions? As I've said, it had taken 72 1 advice and was taking advice from Brian Altman and 2 Cartwright King. 3 A. I had understood that they were over by then, I think. 4 Q. I see. So do you think that's why they're not 5 mentioned? 6 A. So yes. So I think, on entering the business in around 7 about February, from my perspective there has been 8 a review by Second Sight with an Interim Report that 9 says there's no systemic failures in Horizon. Stemming 10 from that, the business has responded with a business 11 improvement programme, a review -- 12 Q. Sorry, just stopping there, you framed the Second Sight 13 Interim Report of 8 July as a report which said there 14 are no systemic problems in Horizon -- 15 A. I did. I was -- 16 Q. -- is that how you saw it? 17 A. I saw the -- yes, the position that I felt that 18 I inherited was that there had been a report which said 19 there was no systemic failures within Horizon, but the 20 business's response to that, nevertheless, was to review 21 the safety of prosecutions -- Cartwright King -- to set 22 up a business improvement programme to deal with some of 23 the issues around training, and also to set up 24 a Mediation Scheme to investigate the individual cases 25 that postmasters still had with Horizon. 73 1 But by, certainly this time, if this is around about 2 October '14, you know, there had been quite a lot of 3 investigation by Second Sight, and by Post Office, into 4 the safety and integrity of Horizon, and therefore -- 5 and I -- as I said before, I hadn't seen any evidence 6 that directly linked bugs -- new bugs -- any bugs in 7 Horizon to losses that hadn't been compensated for -- 8 Q. I see. So the fact that the possibility that the Post 9 Office may have wrongfully prosecuted individuals or 10 that Horizon lacked data integrity, was such a remote 11 possibility that it needn't even be recorded on a risk 12 register? 13 A. I think that's probably right. We felt that the bigger 14 risk was the blue blobs that are there, plus, in terms 15 of Project Sparrow specifically, we were looking to -- 16 for Post Office to sort this out via the Mediation 17 Scheme and the Mediation Scheme was not going very well, 18 and that felt to be the bigger risk. The other risks 19 that you've just cited there were felt to have been -- 20 wrongly, as it turns out -- were felt to have been dealt 21 with, which is why they would be very low probability 22 and so probably not on there. 23 SIR WYN WILLIAMS: Sorry to interrupt but item 11 is the 24 identification of a topic which might give rise to 25 a risk, all right? Is that a fair way of starting that? 74 1 A. Yeah, well -- yes, so you identify a risk. 2 SIR WYN WILLIAMS: Yes, so what, in terms of this risk 3 register, do you understand Project Sparrow to be? 4 A. I understand it to be the -- essentially, the progress 5 of the Mediation Scheme to bring resolution to both 6 subpostmasters and Post Office in the remaining 136 -- 7 or not remaining, but the 136 cases where subpostmasters 8 came forward and had an issue with the working of 9 Horizon. 10 SIR WYN WILLIAMS: Right. So if we understand Project 11 Sparrow in the -- what I'll call for these purposes the 12 narrow sense of the Mediation Scheme, to my way of 13 thinking, at least, what follows kind of makes sense 14 because you're assessing the risks associated with that 15 scheme. What's lacking, I think, from this register, it 16 might be argued, is any recognition of any kind of any 17 other potential risk arising from the use of Horizon. 18 A. Yes, and I would agree with you, and the reason for that 19 is because we thought that, of the things we were 20 seeing, either the risk was so small, you know, it 21 didn't really warrant a -- either it wasn't there or it 22 didn't warrant an entry because the probability of it 23 occurring was below 1 out of 5. So if the -- 24 SIR WYN WILLIAMS: Effectively, you're telling me that the 25 wider risks which are being put to you by Mr Beer, in 75 1 your mind or in ShEx's mind, or UKGI's mind, actually 2 didn't qualify as a risk sufficiently important to put 3 on this register? 4 A. I think that's right, given what we knew at the time and 5 the information we -- 6 SIR WYN WILLIAMS: Yes, I follow that's your reason -- 7 A. Yes. 8 SIR WYN WILLIAMS: -- but I just wanted to understand in my 9 head -- 10 A. Yeah, no, no -- 11 SIR WYN WILLIAMS: -- just before -- have I got it right? 12 A. Yes, I think so. Yes. So we were very much focused on 13 the Mediation Scheme and trying to get that to be 14 successful and for Post Office to make sure it runs -- 15 MR BEER: Can we move forward, please, a year to February 16 2015, UKGI00003427. If we can just go to the 17 "Guidance", please, the "Guidance" tab. 18 A. It's different. 19 Q. Yes, it's changed in nature. If we go back to the risk 20 register? 21 A. The top right-hand date is now correct. 22 Q. Yes, February '15, 28 February 2015. On this occasion 23 shall we treat that as being a true date? 24 A. Yeah, I think we probably should. 25 Q. So just to put this in context, 28 February '15, this 76 1 was couple of weeks after Paula Vennells and Angela van 2 den Bogerd had appeared before Parliament, the Select 3 Committee, on 3 February 2015. I think also by this 4 time, the relationship between Second Sight and Post 5 Office had deteriorated still further; is that fair? 6 A. Yes, that's fair. 7 Q. If we go to -- thank you, we're there -- 55 to 57, 8 Project Sparrow described in the same way, "Owner has 9 changed". Should we understand, following the 10 Chairman's questions, the reference to Project Sparrow 11 in the same way as you described it in relation to the 12 previous spreadsheet, namely in the narrow sense of 13 referring to the conduct of the work arising from Second 14 Sight's Interim Report and the operation of the Working 15 Group? 16 A. No, I think I'm -- Sparrow, as you've seen me use today, 17 became a sort of catch-all term for anything to do with 18 Horizon. So I would imagine that might have -- the term 19 "Sparrow" might have widened out. It wasn't 20 specifically focused on the Mediation but that probably 21 was our focus still at the time. 22 Q. Do we understand the identity of the risk differently, 23 in the use of the words "Project Sparrow" on this 24 spreadsheet? 25 A. I think it's an evolution of where we were from the 77 1 prior spreadsheet. So -- 2 Q. So does this refer Project Sparrow now to wider issues, 3 the bigger issues, as the Chairman described them? 4 A. Well, yes, in the context of having a Mediation Scheme 5 which is clearly not working very well and a situation 6 where there is more pressure on Post Office and the 7 Government because of that fact. 8 Q. We'll see that the risk rating in columns G, H, I and J 9 has not changed at all. 10 A. Yes. 11 Q. Can you see that? 12 A. I can. 13 Q. Again, I think it doesn't even make on it onto the 14 heatmap? 15 A. No. 16 Q. Had the risk therefore really remained unchanged since 17 February 2014, or October 2014? 18 A. We're clearly saying that it has stayed the same. 19 I think by the time I arrived in -- and got to grips 20 with Sparrow in February and March, it was already the 21 case that the Mediation Scheme was in trouble and so 22 I would imagine the risk -- my perception of risk hadn't 23 really changed over that period of time, even though, 24 you know, the circumstances possibly had. 25 Q. If we look at the final column, column Q: 78 1 "JFSA are increasing the profile of this issue, 2 including them and Post Office going to BISCom in 3 February. We've managed to keep ministers distanced 4 from this at the moment but we are seeing increased 5 correspondence in this area, risk level remains the same 6 for now, given ministerial distance." 7 Who had managed to keep ministers distant from the 8 Horizon issues at the Post Office? 9 A. Well, by distant what I think we mean is it's 10 an operational matter for Post Office. 11 Q. So in the arm's length sense, the arms had got longer? 12 A. Well, the arms had stayed the same length, I would say. 13 Q. Well, I think over time you'll see sometimes the arms 14 get longer when it suits Government and then get shorter 15 when it doesn't? 16 A. I'm not -- well, you see ministers wanting to do that 17 and often our advice would be, no, it's an arm's 18 length -- it is an operational matter for the business, 19 they're best placed to deal with it, in our view, 20 rightly or wrongly, and that was the advice we gave. 21 Q. So who had managed to keep ministers distanced? 22 A. Well, I suppose it's a combination of factors but yes, 23 it's our team in the sense that -- 24 Q. How are they -- 25 A. Well, in the sense that where there was inbound 79 1 correspondence we would say that's a matter for Post 2 Office and we would ask Post Office to deal with it 3 so -- 4 Q. You would roll out the "It's an arm's length -- an ALB 5 situation, it is an operational matter"? 6 A. Well, yes, because we felt that it was an operational 7 matter. We had obviously been involved -- or there'd 8 been due based I think in December '14 with Jo Swinson 9 so they had been involved a little bit more but, 10 generally speaking, our position was still that it was 11 an operational matter for the business and that was the 12 best place to sort it out. 13 Q. If there was limited risk and the risk remained 14 unchanged, why was there a need to keep the issue away 15 from ministers? 16 A. Well, because the position of -- that I inherited hadn't 17 changed in that sense. There was still -- it was 18 an operational matter for the business, there was lots 19 of stakeholder correspondence and Parliamentary activity 20 about it but, you know, in essence, it wasn't all that 21 different to the position I'd started with. 22 Q. That last column tends to suggest that a function or 23 a primary function of this risk register is about the 24 risk that the Post Office posed to Government, rather 25 than the risk that the Post Office posed either to 80 1 itself or to the public. 2 A. Well, perhaps there's an element of that because, as 3 I said, it was a ShEx risk register, rather than a Post 4 Office risk register, but we were always mindful -- my 5 job as a civil servant, with my civil servant hat, on is 6 to try and deal with and protect ministers from undue -- 7 or even due, sometimes -- criticism. This was 8 an operational matter for the business, that was the 9 position that was established with ministers, even 10 before I joined, and that was what I was trying to do. 11 Q. Was thought ever given to maintaining a risk register 12 that recorded the risks that the Post Office posed to 13 itself or to the public? 14 A. No, because we'd see that as being a thing for the Post 15 Office to do. 16 Q. Did you ever ask to see Post Office risk registers? 17 A. I -- not specifically but I think they would have 18 been -- come out in part of the Board pack. When 19 I joined the ARC I would have seen but I'd taken 20 assurance that the ARC, that I didn't sit on initially, 21 would be dealing with that side of things. 22 Q. Can we move forward, please, to 2016. UKGI00006622. 23 This top right is 29 February 2016, so a year further 24 on. If we look, please, at lines 40 to 42, we can see 25 Project Sparrow. 81 1 A. Yeah. 2 Q. If we go across to columns G to J, we can see that the 3 risk has increased very substantially -- 4 A. Yeah. 5 Q. -- both in terms of probability and impact, to a risk 6 rating of 20. Highlighted in red, under column K: 7 "Responsibility rests with Post Office to manage 8 both the Mediation Scheme and the stakeholders 9 generally. Post Office Chair undertaking review with 10 independent QC." 11 That's a reference to the Parker or Swift Review: 12 "We are managing ministers' involvement with the 13 intention of keeping the issue independent of 14 Government." 15 Then far right column, in Q: 16 "Post Office Chair wrote to Baroness Neville-Rolfe 17 with an update on his review, meeting scheduled for end 18 of April. Baroness Neville-Rolfe keen to update 19 Lord Arbuthnot, so need a public line. CCRC conclusion 20 is not imminent and no news about JFSA plans for class 21 action. All mediations now completed. CEDR due to 22 issue final summary shortly." 23 This records that the intention was to keep the 24 issue independent of Government. Was that your 25 understanding of ShEx's -- your -- intention at the 82 1 time. 2 A. Yes, and we -- when the new Government came in, in May 3 '15, we tested that position about whether it's 4 an operational matter with ministers, to which they 5 agreed. 6 Q. So it was understood that the Chairman, Tim Parker, was 7 undertaking a review with an independent QC, the CCRC's 8 conclusion was imminent and mediations were completed. 9 In those circumstances, what had happened to increase 10 the risk assessment? 11 A. Well, the mediation had now completed but there was 12 still significant stakeholder issues. It hadn't put the 13 matter to bed and the Mediation Scheme clearly didn't 14 offer a way through. 15 Q. So in what sense did that increase the risk to ShEx? 16 A. I suppose we'd hoped the Mediation Scheme would put the 17 matter to bed and it would be resolved. It clearly 18 wasn't. We had a minister who was very interested in 19 the topic and we had to find a way to provide 20 reassurance and continue to look at the issues to 21 understand why those issues, that JFSA were saying still 22 existed, still existed because it hadn't been dealt with 23 by the Mediation Scheme, so there was a higher risk. 24 Q. Under column P, and if we just scroll up to the top, 25 we'll see that that is an additional column for 83 1 mitigating actions. Back down, please. 2 It's recorded that further mitigating actions are 3 to: 4 "Ensure that the Post Office is proactively managing 5 interest and noise and is aware of ministers' 6 expectations. Manage interests and wobbles from 7 ministers or the centre, including preparing fallback 8 options if current arm's-length position becomes 9 untenable." 10 There's quite a lot in there. 11 A. Yeah. 12 Q. Firstly, what is meant in your mind by the word "noise", 13 in this context? 14 A. I think it's shorthand for anything that is, you know, 15 inbound correspondence, Parliamentary questions, 16 potential debates, Select Committees -- 17 Q. Does it indicate things without substance? 18 A. No, it's just a shorthand word of saying -- well, 19 I suppose it means criticism. It means that everything 20 that was going on at the time, it's a very shorthand 21 word and I think it's one of those words that people 22 within Government would understand and would use. 23 Q. "Manage interest and wobbles from ministers or the 24 centre ..." 25 A. Yes. 84 1 Q. Were those emerging? 2 A. Well, Baroness Neville-Rolfe was very keen to -- was 3 very interested in the topic, and -- 4 Q. That's slightly different from a wobble? 5 A. It is but it was about whether she felt comfortable or 6 not with what was taking place. So periodically I think 7 she did and periodically I think she didn't. So at the 8 time, I think, she'd commissioned Parker, she was sort 9 of happy with that approach, we were waiting for 10 Mr Parker's review. But then, you know, there was lots 11 of noise and she would respond to that, and there's 12 a temptation for her to want to get more involved. And, 13 of course, our position, as we agreed with ministers, 14 was that it was an operational matter for Post Office. 15 Q. But a fallback was to be prepared if the current 16 arm's-length position became untenable? 17 A. Yes, I'm -- 18 Q. So that indicates, does it not, Mr Callard, that it's 19 a matter of choice for Government, whether 20 an arm's-length relationship was maintained with the 21 Post Office or not? 22 A. Yes, it is. 23 Q. So the length of the arms can vary according to 24 Government's desire? 25 A. They can, yes. They can. 85 1 Q. Why was it now being contemplated that the arms might 2 get shorter? 3 A. Well, I think, due to the passage of time and no one has 4 been satisfied -- nobody from the JFSA has been 5 satisfied with the results so far, I think we are 6 waiting for -- well, this implies we've already got 7 Mr Parker's letter but, anyway, you know, it -- you 8 know, the position is just sort of still evolving, 9 I suppose. 10 Q. Can we move forward to 2017, please. UKGI00007578. 11 This is January 2017. Just click on the guidance tab, 12 please. Thank you. 13 Back to risk register, please. If we go to lines 85 14 to 87, thank you. Under column D: 15 "Civil litigation and/or Court of Appeal processes 16 judged that Post Office has acted inappropriately or 17 illegally. Even absent such a finding, ongoing risk 18 that they continue to be perceived to have acted in that 19 way." 20 E: 21 "Potential for significant compensation claims, if 22 civil or criminal courts rule against Post Office. More 23 likely however, and certainly in the short-term, is that 24 this continues to be a significant distraction and cost 25 to the business as they defend their actions." 86 1 The risk has seemingly now dropped back down to 12. 2 A. Yeah. 3 Q. Column K: 4 "Post Office have external legal advisors employed 5 on the civil litigation including a QC. They continue 6 to update UKGI through the Board and directly on key 7 stages but this is a legal matter and distinct from 8 Government." 9 Then: 10 "UKGI have briefed minister Margot James and will 11 keep ministers and SpAds updated at this point. BEIS 12 Legal are also up to speed and contributing to any 13 advice to ministers, maintaining a position that the 14 Government will not comment on an ongoing legal issue." 15 Then there's some detail as to court hearings. 16 "No timeline yet on when the CCRC review will be 17 complete." 18 So I think this now recognises, we can see from 19 column F, that there is a legal risk to presumably both 20 the Post Office and ShEx? 21 A. Yes. 22 Q. But the risk -- 23 A. Well, I'm not sure the risk is legal to ShEx but the 24 risk itself is legal in nature. 25 Q. Okay. So this column, who does it -- who is the -- who 87 1 are the words relating to? 2 A. Well, this is it. It tends to get conflated, as I've 3 said in my witness statement, as to exactly who the risk 4 pertains to but the nature of the risk itself is legal, 5 and its reputational, and its financial. 6 Q. The risk has reduced from 20 back down to 12. 7 A. Mm-hm. 8 Q. Why was that, given litigation was afoot? 9 A. I think, in part, it goes to whose risk it is and 10 I think Government's position is that it is a matter for 11 Post Office and it's somewhat -- actually, as a team 12 leader, I felt it slightly more out of my hands then 13 because it's a court process and I always thought that 14 court was where this was supposed to be. So I perceived 15 the risk to be lower for the team and, therefore, for 16 ShEx because it was -- there was a separate process, 17 which I would hope brings resolution, and it also led to 18 less public correspondence and debate, because it was 19 with the courts. So everything had died down. 20 Q. How much reliance, Mr Callard, should we really place on 21 these risk registers, given that the words "Project 22 Sparrow" can refer to different things, and that 23 depending on it seems, the attitude of the person 24 writing the document, the risk can relate to either the 25 Post Office or to ShEx, or a bit of both, but it doesn't 88 1 say? 2 A. Yeah, well, I think these things are a guide to make the 3 team think -- to make -- to inform people who are 4 reviewing the team and to feed up to the centre. So I'm 5 not sure how much reliance you can place on an internal 6 risk register. This is just a -- to get a snapshot at 7 the time of how the team is feeling about the variety of 8 risks that are with it. 9 Q. There's no, for example, record of the fact that Swift 10 had reported there were eight recommendations and the 11 extent to which those recommendations had been 12 implemented? 13 A. Well, I hadn't seen Swift at that point and I was unfair 14 of Swift's findings. 15 Q. So that's why it's missing? 16 A. Well, I've got a letter from Tim Parker, which I'm not 17 sure if we're going to come to but the letter, I feel, 18 was different to the Swift Report. 19 Q. Very much so. 20 A. So I'm relying on the letter here, which is why, 21 I suppose, the context is also -- with litigation, 22 I thought our -- the Parker letter essentially informs 23 my stance on litigation because I think Post Office is 24 in perhaps a better position than it actually is, which 25 might explain why the risk has gone down because we've 89 1 done Parker. Parker is essentially -- well, it's not 2 done but it's given us some assurance and I think we are 3 approaching litigation in a relatively stronger position 4 than, of course, Post Office was. 5 Q. It records that BEIS Legal were involved and up to 6 speed. 7 A. Yeah. 8 Q. What were they up to speed with? 9 A. So when the Freeths litigation was launched we wrote 10 to -- emailed BIS Legal to notify them, I think -- 11 I haven't got my timeline with me but we had meetings 12 with them, they were aware that it was going on. We 13 introduced them to Post Office and they met Post Office, 14 I think, at our offices. And so they were patched in 15 and they were generally copied into any submissions and 16 updates that we did. So they were aware of what was 17 going on. 18 Q. Did they review any of the legal advice that was given 19 to the Post Office? 20 A. I don't think so, no. 21 Q. Thank you can we move forward, lastly, then to 2018. 22 Before we look at that, you tell us in paragraph 325 23 of your witness statement that, by the time of your 24 departure from the Board in March 2018, you expected the 25 GLO claim to fail -- 90 1 A. Yeah. 2 Q. -- and you expected that the outcome of the litigation 3 would be an endorsement of the integrity of the Horizon 4 system. Correct? 5 A. Yes. 6 Q. Can we look, please, at UKGI00007995. Scroll to the 7 top. We can see this is 10 April 2018. So around the 8 time of your handover to Mr Cooper; would that be right? 9 A. He would have been in place for about three months by 10 then, it was sort of parallel running, but yes. 11 Q. So it was in the course of parallel working -- 12 A. Yes. 13 Q. -- and, therefore, handover to him. Can we see on the 14 heatmap that the top rated risk, I think, is risk 12. 15 A. Yes. 16 Q. If we go to risk 12, please. It's Project Sparrow under 17 your name. 18 A. Mm-hm. 19 Q. Had you taken over responsibility for this risk? 20 A. I think -- so Laura had gone and we were waiting for 21 a new colleague to come in and take over from her, so 22 the reason why it's in red is because that's a change so 23 it's new text compared to the previous risk register. 24 So I was probably between team members. 25 Q. We can see columns D and E are essentially the same as 91 1 previously in the previous year; can you see that? 2 A. Yes. 3 Q. We can see in columns F to J that the legal risk and 4 reputational risk are 4 and 5, albeit the score hasn't 5 been uprated to presumably 20; can you see that? 6 A. Yes, it's -- yes, you have to widen the column but then 7 it would be a 20, yes. 8 Q. Oh, it is, yes. 9 SIR WYN WILLIAMS: I take it that the rating is simply 4 10 times 5? 11 A. Yes. 12 SIR WYN WILLIAMS: Is there any magic about that or -- 13 A. No, it's just that you can't -- the column and the 14 spreadsheet in this particular instance is not wide 15 enough to put 20.0, if you widen the column, you'll see 16 it. 17 SIR WYN WILLIAMS: Not that, I mean, in terms of achieving 18 a rating, is it sort of commonplace to just multiple -- 19 A. Yes. 20 SIR WYN WILLIAMS: -- the probability with the impact? 21 A. I think so. I've seen other risk registers like that, 22 yes. 23 SIR WYN WILLIAMS: All right. Fine. 24 MR BEER: K, essentially the same, but: 25 "UKGI seeking to put a protocol in place" -- 92 1 A. Yes. 2 Q. -- "to ensure Permanent Secretary remains up to date." 3 Column P: 4 "UKGI have briefed minister and will keep ministers 5 and SpAds updated at key points. BEIS Legal are up to 6 speed", et cetera. 7 Then, lastly: 8 "Post Office are preparing for a security of costs 9 hearing, which may trigger negative press but which 10 could lead to the case being dropped. Post Office 11 preparing for the first main hearing in November. UKGI 12 is sighting Permanent Secretary, BEIS, on the issue and 13 establishing disclosure protocol", et cetera. 14 So now project Sparrow is the top-rated risk within 15 the whole of ShEx, yes? 16 A. If you say so. But not for the whole of ShEx but for 17 the whole of the Post Office team -- 18 Q. Yes, for the Post Office team? 19 A. Yes -- well, if you tell me -- if you say so because 20 I can't see the rest of the scores but, yes, I take your 21 word for it. 22 Q. So it's the top-rated risk -- 23 A. Yes. 24 Q. -- with the highest probable impact rating, yes? 25 A. Yes. 93 1 Q. Even with all of the mitigations listed? 2 A. Yes. 3 Q. How was that so, given that you say that you were 4 confident that you expected the claim to fail and the 5 outcome of the litigation would be a full endorsement of 6 the integrity of the Horizon system? 7 A. So I think it was due to the fact that we were having 8 problems around the information protocol -- sharing 9 protocol. So I think it's possibly -- I mean, I haven't 10 seen how this risk has evolved between the last risk 11 register you've shown me and this one but I think it's 12 partly two things: (1) difficulty with the information 13 sharing protocol by that point because we were still 14 waiting to get that agreed with Post Office and I think, 15 secondly, there's perhaps just a little bit of 16 suddenly -- for two years it's been all very procedural 17 and not much happening and, suddenly, I think there's 18 an email in my pack somewhere where I say to people -- 19 well, actually it's just getting closer and this is why 20 we're focusing more on it. 21 So it's much more in our mind, it's much more 22 serious now than 18 months ago when there was lots of 23 procedural hearings -- or not procedural hearings but 24 procedural discussion. 25 Q. But you thought the claim was going to be roundly 94 1 dismissed, and -- 2 A. Yeah. 3 Q. -- integrity of Horizon upheld? 4 A. That's what I -- yes. 5 Q. But now this seems to have switched back to be looking 6 at a different issue, namely the information management 7 protocol -- 8 A. Yes. 9 Q. -- and the risk that that created? 10 A. Mm-hm. 11 Q. What about, using the Chairman's words of earlier, the 12 bigger issue, namely that the Horizon system may be 13 proved to lack integrity, which may have a consequence, 14 in fact, on criminal convictions? 15 A. Quite. But I hadn't really seen any -- so during that 16 two years' worth of discussion about the litigation 17 case, over those two years we weren't getting any 18 information from the GC that the risk of the case itself 19 had gone up. There was no -- we were told there was 20 nothing new particularly in the claims and, of course, 21 we hadn't seen the Swift Report so I was unsighted on 22 some of those issues that were in that, which is why 23 I was of the view I stated in my witness statement about 24 the underlying status of Horizon. 25 The risk here, I think, represents increasing 95 1 tension, as Board members transition, as we're trying to 2 get an information sharing protocol in place and Post 3 Office not being very cooperative, and the risk 4 ultimately getting nearer and people thinking "Ooh, hang 5 on", I think, probably. So I think that's what -- that 6 is what explains the change in risk rating. 7 Q. So can I summarise your answer, and tell me if I'm 8 incorrect: the risk of the Post Office losing the claim 9 and that having an impact on the integrity of Horizon, 10 and the possibility of that having an impact on criminal 11 convictions, was such a low risk that it didn't even 12 deserve to be included on a risk register? 13 A. Well, clearly it should have been. But no, it wasn't. 14 We were very much focused on the litigation and 15 I suppose, inherently, the risk you've just set out is 16 kind of in that risk somewhere, even if it's not -- 17 Q. Where is it -- 18 A. Well, it's not explicitly set in that risk, it's -- 19 Q. This seems to be about process issues -- 20 A. Yes. 21 Q. -- satellite issues -- 22 A. Yes. 23 Q. -- that are bolt-ones to the main issue? 24 A. No, I'm -- 25 Q. I'm asking: why do we never see, in any of these, 96 1 an assessment of the big issue or the main issues? 2 A. Yes, it's a good question and I think, as I've said in 3 my witness statements, you know, on reflection we should 4 have got a merits opinion and all those sorts of things 5 and been more proactive and -- 6 Q. But why didn't you? 7 A. I suppose -- why didn't I? Because, generally speaking, 8 Government's position, up until -- well, not this point 9 but prior to late '17, had always been to be quite 10 hands-off and leave it as a matter for courts and the 11 arm's-length body. It wasn't until the Magnox study 12 that -- lessons learned that UKGI did, where they were 13 involved in another case where it was stated they should 14 be more proactive, so I think -- 15 Q. But, Mr Callard, even if the Government's attitude is 16 that this is an arm's-length body, the matters concerned 17 are operational in nature and there's an element to 18 which we, Government, should not get involved because 19 there's either an independent Mediation Scheme or 20 litigation -- 21 A. Yeah. 22 Q. -- there's still a risk to the, perhaps, existence of 23 the Post Office or the proper functioning of the Post 24 Office, if things go badly in the course of those 25 mediations or -- 97 1 A. Yes, but -- 2 Q. -- litigation. Why do we see none of that recorded? 3 A. Because I don't -- I didn't see anything that changed 4 my -- the information that I was getting didn't change 5 my view that, essentially, there hadn't been an issue 6 with Horizon found which causes losses to 7 subpostmasters. So I hadn't seen any new information 8 and, when I asked about that and when Jane MacLeod gave 9 her updates at Board about those sorts of things, there 10 was never any discussion that, "Oh, by the way, we found 11 an issue about balancing transactions as set out in the 12 Swift Report". 13 So my view on the technicalities and merits, 14 I suppose, of what I understood -- I mean, merits not in 15 a legal sense -- but my understanding of what had been 16 found, say, one to two years prior hadn't changed. So 17 I didn't think the risk -- the underlying point that 18 you're saying that there was an underlying problem with 19 the -- with Horizon, I didn't think that risk had 20 particularly changed -- 21 Q. Isn't there a -- 22 A. -- which is wrong. I accepted that that's wrong. 23 Q. Even if that was your view, ought it to have been 24 recorded? 25 A. On reflection, yes. But my point here is that the risk 98 1 register is a sort of -- it's not a formal -- to my 2 mind, anyway, it's not a formal record as such. You 3 know, it's -- although it obviously goes up to the -- to 4 ExCo and the Board, it was -- from my perspective, it 5 was more a sort of record -- or a way of encapsulating 6 the risks as we saw it as a team. And inherently in 7 those risks, there are lots of other issues behind them 8 that we may be working on and dealing with, which are 9 not set out specifically in that wording. 10 MR BEER: Thank you. 11 Sir, can we take the second morning break. It's 12 just coming up to 12.20 so 12.30, please? 13 SIR WYN WILLIAMS: Yes, certainly. 14 MR BEER: Thank you, sir. 15 (12.18 pm) 16 (A short break) 17 (12.30 pm) 18 MR BEER: Good afternoon, sir. Can you see and hear us? 19 SIR WYN WILLIAMS: Yes, thank you. 20 MR BEER: Thank you. 21 Mr Callard, can we turn to reporting to ministers, 22 please, as a topic, and start by looking at POL00065473. 23 If we go to page 5, please. 24 If we scroll down, please. We'll see this is 25 an email there, if we stop there, from Jane MacLeod. If 99 1 we scrolled up we would see that it was to Paula 2 Vennells on 2 April 2015. You're not included on the 3 distribution list but there's a comment made about you 4 which is why I'm asking you. It says: 5 "We [Jane MacLeod] are meeting with Laura tomorrow 6 ..." 7 That's Laura of the ShEx, yes? 8 A. Yes. 9 Q. "... so we can review where we've got to. Laura and 10 Richard Callard are briefing [Lady Neville-Rolfe] on 11 Tuesday on another matter, and Laura is concerned that 12 Sparrow will come up." 13 Do you see that? 14 A. Yes. 15 Q. So we're mid-2015, a prospective briefing of Baroness 16 Neville-Rolfe by you and Laura, and it's recorded by 17 Jane MacLeod that Laura was concerned that Sparrow would 18 come up. Why would ShEx be worried that Project Sparrow 19 would come up in a discussion with the Minister? 20 A. Can you just clarify what month this was? 21 Q. August 2015. 22 A. August. I don't think we were. We saw Baroness 23 Neville-Rolfe almost weekly on other matters, usually 24 being the Investment Bank, and I don't think we were 25 particularly concerned if it came up. 100 1 Q. Was there any sense that you, ShEx, had to formulate 2 lines with Post Office before briefing ministers? 3 A. No, not necessarily but we would check with Post Office 4 whether they are factually accurate, for example, and we 5 would ask -- I mean, no doubt what Laure is meaning here 6 is "No doubt Baroness Neville-Rolfe may well ask about 7 Sparrow, what's the latest?", depending on what was 8 happening around that time. I think if it's August '15, 9 I think they were about to -- Jane MacLeod and Paula 10 Vennells were due to meet Baroness Neville-Rolfe on 11 6 August, I think, so it could have been in preparation 12 for that. 13 Q. To what extent did you and ShEx adopt Post Office lines 14 when reporting to the minister? 15 A. We would report our own lines but they would be 16 sometimes similar to Post Office lines because they 17 would be based on what we understood the facts to be 18 from Post Office. 19 Q. Would you sometimes, in agreement with the Post Office, 20 keep information from the Permanent Secretary or the 21 Minister? 22 A. No. Not on -- not with the express intent of 23 withholding it. 24 Q. Would you decide when it was necessary to provide the 25 Minister with information in your own judgement? 101 1 A. Yes. Yes, that's up to us to decide. 2 Q. You would draw that as a distinction between keeping 3 information from the Minister? 4 A. Yes, because you don't want to go to a minister 5 half-cocked, if you don't understand the full facts, for 6 example. 7 Q. In your witness statement at paragraph 67 -- maybe we 8 should turn it up, please. It's page 34 of your witness 9 statement, fourth line of paragraph 67. You say: 10 "As to Horizon I also felt I had been doing 11 a reasonably good job of preventing the Minister from 12 being criticised publicly in relation to Horizon, which 13 I saw as part of my role ..." 14 Just stopping there, do you mean part of your role 15 as a NED? 16 A. No, as part of my -- my role as a civil servant is to 17 deal with and protect ministers from undue, or sometimes 18 due, criticism. 19 Q. How did that sit with your role as a NED where -- 20 A. Well, no, that was my -- with my civil servant hat on. 21 Q. What about if you needed to as part of the Board? 22 A. Needed to what, sorry? 23 Q. Say that "We have suggested X or Y to the Government and 24 they have failed to deliver"? 25 A. Sorry, I don't quite understand. 102 1 Q. Yes. You were part of a Board -- 2 A. Yes. 3 Q. -- of a company -- 4 A. Yes. 5 Q. -- that might not always agree with what the Government 6 was doing -- 7 A. Yes. 8 Q. -- in relation to that company? 9 A. That's correct. 10 Q. Where did your loyalty sit in that situation? 11 A. Well, that's when it gets quite difficult and you try 12 and make the case of Government to the Board. So, for 13 example, that happened quite a lot around mutualisation 14 and those sorts of issues back in 2014. 15 Q. You continue: 16 "... and that's what I was referring to when I said 17 we had 'kept a lid' on things." 18 That's in an email that we're going to look at in 19 a moment. 20 A. Yes. 21 Q. "As I explain further below, our overarching approach in 22 relation to Horizon was that this was an issue for [Post 23 Office] to address and there was no real role for 24 Government to play, particularly in the absence (as we 25 understood it) of any evidence of a fault with Horizon 103 1 that might have caused losses in branch accounts." 2 That overarching approach -- ie that Horizon was 3 an issue for Post Office and not for Government -- how 4 long did that overarching approach last? 5 A. I think it lasted throughout my tenure. I'd inherited 6 it, we'd reconfirmed it in 2015, when the new Government 7 came in, and it sort of continued through to when 8 I left. 9 Q. Knowing what you know now, do you consider that the 10 overarching approach was an appropriate one? 11 A. It's -- I sort of wrestle with this a little bit. I'm 12 not sure because I'm not quite sure what else Government 13 could do to insert itself into the situation and to have 14 essentially resolved the situation. I'm not sure what 15 Government could have done, so I'm not sure what I would 16 have suggested. 17 Q. Can we go, please, to the email, UKGI00006454, an email 18 from you to Tim Parker of 18 January 2016, second 19 paragraph: 20 "The underprovisioning of subpostmasters 21 compensation issue has worried [Baroness Neville-Rolfe], 22 perhaps disproportionately so." 23 Just stopping there, the underprovisioning of 24 compensation to subpostmasters, is that a recognition by 25 you that, in fact, subpostmasters had been 104 1 underprovisioned in terms of compensation? 2 A. This is an entirely separate matter where the business 3 had misstated its accounts, it had made a mistake in its 4 accounts. The provisioning is about compensation to 5 subpostmasters as part of the Network Transformation 6 programme. They hadn't pulled up through the right 7 figure and the accounts were wrong and Baroness 8 Neville-Rolfe was very worried about that, naturally. 9 Q. Is that established by the fact that the subject of this 10 is RemCo? 11 A. Possibly because it might be that look, there's been 12 a bit of a mess-up there, what are we doing about it? 13 But I'm not quite sure why it's about RemCo. Yeah, well 14 in the bottom of that second paragraph, "I would be 15 happy to share drafts" ... 16 Q. So this isn't to do with Horizon? 17 A. No, this is about retrospective action, why has there 18 been an accounting problem? And it was -- we had to -- 19 the business had to restate its annual accounts, which 20 is obviously wrong and embarrassing, because it pulled 21 the wrong figures through from its account -- from its 22 underlying source documentation from a spreadsheet. 23 Q. Can we see also from the third paragraph from the bottom 24 that you deal separately with the issue of Sparrow? 25 A. Yeah. 105 1 Q. Does that help to establish that the second paragraph is 2 about the issue that you've mentioned, rather than 3 compensation to subpostmasters for -- 4 A. Yes. 5 Q. -- Horizon issues? 6 A. Yes, I think so because I'm also saying that it's also 7 about Sparrow, in addition to what we've just talked 8 about in the second paragraph. 9 Q. You say, in any event, that you have sought to keep 10 a lid on it, in the first line of the second paragraph. 11 In what way had you sought to keep a lid on that 12 issue -- 13 A. Um -- 14 Q. -- even though it's a separate issue? 15 A. I think that means just having dealt with it. So 16 I think Baroness Neville-Rolfe was very worried about 17 the mistake in the accounts, I thought perhaps 18 disproportionately so because the submission I'd put to 19 her about it consisted of two things: one was a cost 20 overrun on IT, which was real money, and this, which was 21 just an accounting error and it hadn't actually meant 22 subpostmasters hadn't received the compensation they 23 wanted, it was just that Post Office hadn't forecast 24 properly in their accounts what it was but underlying 25 that they knew what they would have to pay. 106 1 So of the two errors that I reported to her around 2 that time, one was a real cash cost and one wasn't. 3 This one wasn't, hence my "disproportionately so" 4 comment. 5 Q. So, so this is a reflection, albeit on a separate issue, 6 of you acting in a way that either gave or withheld 7 information from Baroness Neville-Rolfe; is that right? 8 A. Well, I didn't withhold the information from her, no. 9 This is saying I've given her a submission about what's 10 gone wrong. Of the two issues, she reacted to one of -- 11 this issue rather more strongly than the other issue, 12 which surprised me, because the other issue was about 13 real money and real cost overrun. This was just 14 an accounting error that had no cash implications. 15 Q. I think you do agree, however, that you, on occasion, 16 got the balance wrong in making decisions as to whether 17 or not ministers should or should not be provided with 18 information? 19 A. Probably. 20 Q. I think it's in your witness statement -- 21 A. I'm sure it is. 22 Q. -- at page 36. It reads to me as a bit of an admission? 23 A. Okay, well, I'm not saying -- 24 Q. Page 36 of your witness statement -- it'll come up on 25 the screen -- paragraph 70. 107 1 A. Ah yes. 2 Q. Page 36, paragraph 70: 3 "Whilst I did my best to do so, my job is subjective 4 and I acknowledge there were times when I got the 5 balance wrong, and one example is provided by an email 6 exchange in March 2015 where I agree with other members 7 of the Shareholder Team that there were dangers in the 8 Minister, Jo Swinson, receiving a copy of the Second 9 Sight thematic report." 10 Then you give the reference: 11 "In essence I agreed with the advice of Laura 12 Thompson that 'The Minister and Government should 13 maintain its independence here', and I expressed that 14 view in an offhand reply that it would be 'bonkers' for 15 the Minister to compromise that independence, which we 16 had considered a key part of the scheme, by receiving 17 the report in circumstances where she might then be 18 required to express a view and potentially take a side." 19 So this is you essentially saying that you 20 acknowledge that you got it wrong in trying to dissuade 21 the Minister from seeing the Second Sight report, the 22 thematic report? 23 A. Yes, I think my concerns were legitimate but, you know, 24 on reflection, yes, you probably should see it -- one 25 should see it. 108 1 Q. You explain it as an attempt to draw the right line by 2 letting the Post Office have the freedom to deal with 3 operational matters, essentially? 4 A. Basically because, if she receives that report -- we 5 spent quite a long time, and my predecessors as well, in 6 maintaining this operational independence line. Once 7 the report's received, she has to take a view on it and 8 that's going to be very difficult for her, potentially. 9 Q. But, at this point, Second Sight had been sacked in 10 controversial circumstances? 11 A. I am not sure I'd agree with that particular 12 characterisation of it. 13 Q. What had happened? 14 A. So the way -- the Mediation Scheme -- this is by March 15 2015 -- the Mediation Scheme was progressing and Post 16 Office had done all of its investigations into the 17 cases. Second Sight were retained to finish their 18 investigations into those cases and to report their 19 thematic -- to produce their thematic report. So 20 I guess it was controversial. It was received 21 controversially but, to my mind, it was the conclusion 22 of the Mediation Scheme and that was that, essentially. 23 Because I knew that it would create tension. 24 Q. In what way would the Minister, having a copy of the 25 Second Sight Report, involve her in operational matters? 109 1 A. Well, if she had a copy of the report she'd have to read 2 it. If she reads it, she's then got to take a view and 3 she either has to decide -- 4 Q. Why does she have to take a view? 5 A. Well, I suppose she doesn't but if she's asked by -- 6 Q. No, no, that's a fundamental part of your answer: if she 7 reads a document, she has to take a view. 8 A. Well, there'd been a number of difficult Parliamentary 9 debates where she'd managed them very well. If she 10 reads the report, someone will say to her "Well what do 11 you think of this? Is there a case here to be dealt 12 with or is there not?" And the way -- this was a very 13 polarised topic -- whichever answer she gave, people 14 would find fault with it, which I thought, as a person 15 trying to keep her away from criticism and trying to 16 protect her, I thought -- 17 Q. So Mr Callard, if a document addresses a difficult issue 18 about which there is more than one view, that means the 19 Minister shouldn't see it because she might have to take 20 a view about it? 21 A. No, that's not what I'm saying. I'm saying that there 22 was a risk that that's what she ends up being asked to 23 do and that, because we'd agreed that this was 24 an operational matter and that was the agreed position, 25 which she had agreed as part of -- before I'd even got 110 1 there, it was an extension of that position, or 2 a continuation of that position. I'm trying to flag to 3 her the risk that, if you, essentially, break that 4 position, then you're exposed to risk. And she -- and 5 sorry, to finish off, she basically overruled me, which 6 I'm saying, on reflection, was right. 7 Q. Doesn't your approach show a fundamental conflict within 8 the ALB model between the wishing to be seen as 9 independent, on the one hand, and yet, if advice like 10 this is given and acted upon, oversight cannot be 11 exercised in any meaningful anyway? 12 A. Sorry, can you just repeat the two ... 13 Q. Yes. Government wished to be independent -- 14 A. Yeah. 15 Q. -- and seen to be independent of the Post Office -- 16 A. Yes. 17 Q. -- and leave operational matters -- 18 A. Yes. 19 Q. -- to the Post Office. 20 A. Yes. 21 Q. Did that approach mean that it could never, effectively, 22 exercise any oversight? 23 A. I don't think it means never but I think what we're 24 trying to get at here is that they are best placed to 25 deal with it because, as I said before, it's quite hard 111 1 to understand how Government would insert itself into 2 this situation to resolve it. 3 Q. Had you not been overruled, Government would never have 4 seen the report? 5 A. Possibly not, no. 6 Q. Can we look, please, at what another Minister says, Jo 7 Swinson says, about information that was not provided to 8 her, by looking at the document itself, to start with. 9 UKGI00002439. This is just a covering email to the 10 attachment because the attachment isn't dated, so I'm 11 using this to date the attachment. It's an email from 12 you, again to the Swinson generic address. Yes? 13 A. Yes. 14 Q. It's -- 15 A. Ah, right, yes, sorry. 16 Q. -- addressed to Claire. 17 A. Yes. 18 Q. Can you help us identify who that would have been 19 within -- 20 A. She would have been -- 21 Q. -- the private office? 22 A. -- a private office person. Yes. 23 Q. "Thanks for the discussion today -- very helpful. 24 I have attached the note I mentioned -- Alice saw the 25 first iteration ..." 112 1 Who would that be? 2 A. Alice Perkins. 3 Q. Okay. 4 "... I have just sent this second iteration to her 5 and thought it might be expedient that you see it sooner 6 rather than later. I would be grateful if you could 7 flag any potential 'red [flags]' in here. 8 "... this is not a speaking note as such, it's too 9 long for that. It's something to get thoughts in some 10 sort of order and give you the general gist of our 11 arguments. 12 "If you do have a word with Jo prior to the meeting 13 I would be grateful for any readout ..." 14 Can you give us the context to this, please? 15 A. So we were preparing for a meeting with Jo Swinson -- 16 "we" being, I think, Mark Russell, my CEO, and I. We 17 had provided advice to both Jo -- sorry, both Jenny 18 Willott and then Jo Swinson about the replacement of the 19 CFO. Ministers had rejected that replacement -- 20 a replacement on the basis that they were happy with the 21 salary and sort of golden handshake but they'd objected 22 to the payment of notice for the exiting CFO. So -- 23 Q. That's Mr Day? 24 A. Mr Day, yes. So, on the basis that they rejected that, 25 Mark and I thought we should go and see Jo Swinson to 113 1 try and change her mind because it was very important to 2 get a new CFO and that's obviously very difficult, going 3 to see a minister to ask them to change their mind when 4 they've already opined. 5 Q. Thank you. Can we look at the attachment, please. 6 UKGI00002440. Just look at the top half of the page. 7 So you said in the covering email -- this isn't 8 a speaking note but it's the gist of your arguments, 9 your arguments being ShEx's arguments? 10 A. Well, it's my argument, it's my note but, essentially, 11 yes, what I was planning to say and it's a way of 12 getting my thoughts in order by writing it down. 13 Q. "Opening gambit 14 "As you know ShEx and the Board are clear that the 15 current CFO [that's Chris Day] is not the right person 16 to take the company forward given the challenges it 17 faces." 18 Skipping over. 19 "You know all that and on reflection we should have 20 approached you earlier ... we want to explain to you why 21 we need to come and see you on this, and why Alice and 22 the chair of the RemCo want to meet you and Vince." 23 That's Vince Cable, yes? 24 A. Yes. 25 Q. "The difficulties on the CFO front have brought forward 114 1 the concerns that the Board (and ShEx) has about the CEO 2 ..." 3 That's Paula Vennells, yes? 4 A. Yes. 5 Q. "... which you need to be aware of, and which puts the 6 appointment of a new CFO in a wider context. 7 "The Board's concern over the performance of the CEO 8 has been growing for some time, and has only recently 9 got to the point where it feels it needs to act in due 10 course." 11 I'm going to ask you this afternoon about some 12 questions concerning Paula Vennells' position within the 13 company and what action you and others took about it. 14 A. Okay. 15 Q. "But this leaves the Board in a difficult place -- 16 removing a CEO without a confident CFO capable of 17 holding the fort is a big risk. This makes replacing 18 the CFO all the more important ... 19 "We need to obtain a strong CFO and give them time 20 to get their feet under the table before acting on the 21 CEO. Without replacing both of them, the plan is at 22 significant risk. 23 "[It] is extremely sensitive and highly 24 confidential." 25 Then you sort of ask yourself a question, the type 115 1 of which you would imagine a minister to ask you; is 2 that right? 3 A. Yes. 4 Q. And give yourself the answers? 5 A. Mm-hm. 6 Q. "Why haven't you told me about the CEO before? Why 7 didn't it form part of the CFO advice?" 8 A. Yeah. 9 Q. Pregnant in those questions is the truth, is that right, 10 that you hadn't told the Minister about any concerns 11 involving the CEO before then? 12 A. No. She'd been -- I suppose the worries about Paula had 13 been growing since I joined in January/February. Jo 14 Swinson had been on maternity leave for most of that 15 time. Mostly I didn't have a conversation with her 16 replacement, Jenny Willott either but, no, as I say 17 here, somewhere, this has kind of grown over time and 18 it's kind of starting to crystallise now. 19 Q. So you hadn't told the Minister, whether in the person 20 of Jo Swinson or her replacement about any concerns 21 about Paula Vennells before this point? 22 A. No, because as I say in the first bullet of that 23 section, it's a very dangerous and destabilising thing 24 to do because, in the second bullet, your relationship 25 with her is already irrevocably damaged and I think in 116 1 the early times often my tenure I didn't have enough 2 evidence to substantiate any worries. And this is 3 double edged: if I tell ministers early irrevocably 4 damage and put doubt in their mind about their 5 relationship with their CEO, which, if I'm wrong, is 6 hard to unwind, so you have to be quite sure of your 7 ground. 8 Q. In the third bullet point you say: 9 "The Board has been monitoring the situation for 10 some time but until recently we felt the balance of risk 11 pointed towards keeping Paula in place ... 12 "There are number of reasons why the balance has 13 changed: 14 "Efforts to improve her performance have failed. 15 "The Board is increasingly frustrated with the lack 16 of progress on various areas, primarily the lack of 17 'grip and pace' applied to revenue growth, cost cutting, 18 specific business areas like Horizon, and the strategy 19 in general ..." 20 A. Yeah. 21 Q. Can I ask you now, before we get to the questions 22 specifically about Ms Vennells this afternoon, what was 23 the Board's concern at this point specifically over her 24 approach in relation to business areas like Horizon? 25 A. I think it was a reflection of the fact that the 117 1 business -- the response to the Second Sight Interim 2 Report seemed to be along the right lines, in terms of 3 a Mediation Scheme, et cetera, but it had been rather 4 badly managed, to the point where, a year on, you know, 5 it's actually a cause of great difficulty and, whilst 6 I don't think she was personally responsible for that, 7 it was a reflection of the lack of general grip that we 8 felt she might have on the business because things like 9 the terms of reference with Second Sight, I don't think, 10 had been agreed, I think the Mediation Scheme had been 11 announced hastily, and it was things like that that made 12 us doubt that -- 13 Q. You say: 14 "This crystallised ... at the June away day, where 15 Paula Vennells very much sat back and let her team 16 lead -- she acts more like a [Non-Executive Director] 17 than someone who leads from the front." 18 A. Yes. 19 Q. Was that your own view or the view of the entirety of 20 the Post Office Board? 21 A. I think most of us felt like that, particularly -- you 22 talk about, in here, you know, it started to 23 crystallise -- the Board's view crystallised during that 24 time because, during those discussions, she tended to 25 ask the questions of the people who were presenting the 118 1 strategy when, actually, as an Executive leading, it's 2 her strategy too and she should be putting the case 3 forward. 4 Q. If we go over the page, please. 5 "What is wrong with the CEO? 6 "It's about 'grip' and 'pace'. 7 "[She] has many strengths, but given [Post Office 8 Limited's] increasingly competitive environment and 9 strategy it must implement, we need stronger leadership 10 and vision. We need a better grip on the detail, we 11 need more traction on the ground to deliver cost savings 12 and revenue growth at pace. 13 "A number of examples include ..." 14 Then the third bullet point: 15 "Issues like the Horizon Mediation Scheme and 16 financial services have required significantly more 17 oversight by the Board than one might expect as things 18 haven't been gripped (to the point where the Board have 19 set up subcommittees when it should be Paula or the 20 CFO)." 21 Is that a reference to a Litigation Subcommittee? 22 A. No, that's the Sparrow Subcommittee of 2014, which was 23 set up to essentially give the Board more bandwidth to 24 think about how to deal with the emerging problems with 25 the Mediation Scheme. 119 1 Q. Was it the Board's view that that ought to have been led 2 by the CEO and/or the CFO? 3 A. Well, I think the Board's view is that we shouldn't have 4 had to get to that point where we're setting up 5 a committee to deal with it. 6 Q. Scrolling down: 7 "Would a new CEO require higher remuneration?" 8 Answer: 9 "Yes ... 10 "What have you done to put measures in place to 11 improve her performance? 12 "Alice has spent an enormous amount of time 13 coaching, mentoring and monitoring Paula. 14 "... Alice has significant NED experience ... 15 "Paula responded to initial efforts ... but this has 16 levelled off and is ultimately about character and 17 aptitude. 18 "Why are we paying her big bucks if she is not 19 performing? 20 "Her base pay is in the bottom quartile of 21 a cross-section of CEOs." 22 Over the page. Again, a question that you thought 23 Jo Swinson might ask you: 24 "I remember Alice asking to increase Paula's pay? 25 "At that point she was doing well, responding to 120 1 coaching Alice and the Board were giving ..." 2 Third bullet point: 3 "Since that point: 4 "Paula has proactively said to Alice she wants to 5 say to see transformation through ..." 6 Then a challenge: 7 "Don't see how this has anything to do with the 8 CFO?" 9 Scroll down please, some questions about the CFO. 10 Over the page. Lastly: 11 "Ministers have made their decision! 12 "This is of great concern to the Board, who are 13 personally responsible to you and the Secretary of State 14 for the successful running of the business, and it's 15 their view that a change is needed. 16 "You are effectively saying you don't have 17 confidence in their judgement on these matters, which is 18 a very difficult position for the non-executives and 19 Chair to be in." 20 So "The ministers have made their decision", what 21 does that refer to? 22 A. That refers to -- pretty sure it refers to they were not 23 prepared to pay Chris Day's exit payment, which meant we 24 couldn't, as a Board, move Chris on because he hadn't 25 performed so badly that he could be fired, so -- and we 121 1 had Al Cameron waiting in the wings and we wanted to 2 bring him in. He wasn't going to wait forever but 3 ministers had made the decision they didn't want to pay 4 that exit payment and we were trying to persuade her to 5 change her mind at this point. 6 Q. Did you present to Jo Swinson your case in accordance 7 with this non-speaking note? 8 A. I think I probably did so. I recall the meeting was 9 supposed to be for half an hour and it lasted 90 10 minutes, or something like that. It was quite a long 11 meeting and, given the volume of stuff in there about 12 the CFO, I think I probably would have done. We were 13 essentially in the position of where we were sort of 14 trying to throw the kitchen sink at this to get 15 ministers to change their mind because that's very hard 16 to do. 17 Q. Is it fair to say that a part of ShEx's approach was 18 specifically, as the CEO, Paula Vennells' lack of grip 19 and pace over Horizon issues? 20 A. I don't think Horizon was the lead thing, that was 21 indicative. I think it was more around the strategy. 22 So it mentioned on the first page that strategy, the 23 sort of revenue growth, cost reduction, those sorts of 24 things, and the general kind of NED-like stance that she 25 would take. 122 1 Q. By "NED-like stance", do you mean an outsider? 2 A. Well, kind of asking the same -- a Board asking similar 3 questions that a NED might ask when, actually, other 4 Chief Executive's that I've seen operate come in, and 5 they almost present their colleagues' sort of individual 6 strategies and they take the lead and it's them telling 7 the Board what's going on, rather than asking questions 8 of her team. 9 Q. Can we look at what Jo Swinson says about this, 10 WITN10190100, at page 21, please, paragraph 45 onwards. 11 I'm going to read between paragraphs 45 and 47 so you 12 get the complete context: 13 "I have been shown by the Inquiry an undated 14 briefing note [that's the document I've just shown you, 15 the one ending in 440]. It seems to have been attached 16 to an email of 20 August 2014 [the email I showed you]. 17 I understand, seeing it now, that this appears to have 18 been written by [you] as points or prompts for Alice 19 Perkins in advance of a call schedule between her and 20 me, to help her try to convince me to ask the Treasury 21 for permission to recruit a new CFO, Alisdair Cameron, 22 on a very high salary to replace Chris Day ..." 23 Is that right? Was that the purpose of the 24 document? 25 A. My understanding of the document -- well, no, so my 123 1 understanding of the document is that it was speaking 2 note for me when I was accompanying Mark Russell to talk 3 to Jo Swinson about this, and that it wasn't to persuade 4 her to pay a high salary. That had been, I think, not 5 agreed but not objected to. What had been objected to 6 was the exit payment. I think it was "payment for 7 failure", she used the term of. It's the exit payment 8 that was objectionable to I think Jenny Willott and then 9 Jo, not the salary. 10 Q. She continues: 11 "In the light of Government finances at the time and 12 the austerity measures in place, any appointment using 13 public money to a role above a certain level of 14 remuneration required Treasury approval. I did not see 15 this document at the time, indeed it was not something 16 ever designed for me to see, as the covering email and 17 the contents of the note made clear (eg the fact that 18 the note is structured as a series of responses to 19 questions I might ask). It seems that Richard Callard 20 was asking my private office for advice on how Alice 21 Perkins could make the points in the note to me in a way 22 that would be was persuasive, and he anticipated I would 23 not be happy ('I would be grateful if you could flag any 24 potential "red [flags]" in here')." 25 Is that right: you were asking her private office on 124 1 how Alice Perkins could make points in a way that might 2 land? 3 A. No, I think I'm asking how -- I think I'm saying to the 4 private office "I'm going to say this stuff, is there 5 anything" -- clearly there probably will be red -- you 6 know, difficult pushback because Jo Swinson was very hot 7 on executive pay. I think what I'm saying in my message 8 to private office, was "This is broadly what I'm going 9 to say can you -- you know Jo better than I do, can you 10 flag?" 11 Q. So it's about you speaking to the Minister rather than 12 Alice Perkins? 13 A. That's how I interpret it. 14 Q. On to paragraph 46, please: 15 "I was shocked to read this note. It seems to show 16 Mr Callard, a ShEx official, who was one of the key 17 officials who was supposed to support me in my 18 Ministerial role with regard to Post Office matters, 19 instead using his Departmental position, access and 20 contacts to work on behalf of [Post Office] to seek to 21 persuade me to do what [Post Office] wanted, contrary to 22 wider Government policy on pay restraint. It also makes 23 clear that he had deliberately kept me in the dark about 24 the concerns that ShEx had about Paula Vennells' 25 performance." 125 1 Just stop there, then. Firstly, were you using your 2 Departmental position, access and contacts to work on 3 behalf of Post Office in a way that was contrary to 4 Government policy on pay restraint? 5 A. I don't think so because we were -- many were very clear 6 in the submission to ministers about what that pay is 7 and they had already opined on it. Pay -- senior 8 executive remuneration is one of the most difficult bits 9 of the Shareholder Executive/UKGI job because our assets 10 have to fish in the private sector market and you want 11 to get the best CEO that you can do, and CFO, which is 12 what we're trying to do here. The Shareholder Executive 13 was aligned with the Board in terms of trying to get 14 a new CFO in, and it didn't seem to us value for money 15 that you wouldn't pay -- I can't remember what the exit 16 payment was -- but that you wouldn't pay something in 17 the very, you know, tens of thousands to remove Chris 18 Day, if you could bring in a CFO who may save multiples 19 of that money over the course of the next few years in 20 implementing Post Office's strategy. 21 Q. Is it right that you deliberately kept from her -- 22 ie kept her in the dark -- concerns that ShEx had about 23 Ms Vennells' performance? 24 A. I think I explained that in the note, that, basically, 25 you have to wait until you're sure. We weren't sure 126 1 until the June away day and it's damaging to put doubt 2 in Jo Swinson or many minister's mind about that before 3 you are sure, and also, frankly, she wasn't -- wasn't 4 around until the end of June, back to the end of June. 5 Q. This was sent to her private office but wasn't ever 6 intended for her to see? 7 A. It wasn't intended for her but I wasn't hiding anything 8 because otherwise I wouldn't send it to her private 9 office. In fact, I say, I think, at the bottom of that 10 email "If you do talk to Jo about it, I mean, don't show 11 the note but you can share the sentiment of the note and 12 let me know if there's any red flags coming back". 13 Q. So was this you attempting to pitch your argument in the 14 best way possible by testing the water with private 15 office before speaking face-to-face with the Minister? 16 A. Yes, because the private office understand what -- they 17 know their ministers pretty well and so will have 18 a sense of what they're going to react to and how 19 they're going to react. So I think there's other 20 instances in my timeline where I sort of share things 21 with private offices to say "How will this float? I'm 22 trying to get your approach on how do I pitch this, 23 given the objective I'm trying to achieve". I'm trying 24 to get their advice. 25 Q. Lastly, before the lunch break, can we look at second 127 1 passage in Ms Swinson's witness statement, page 52, 2 paragraph 128. Ms Swinson says: 3 "I do wish I had asked to meet with Second Sight, 4 though I am pretty certain if I had that ShEx would have 5 told me that this was not possible due to operational 6 independence. I feel let down by a failure of briefing 7 from ShEx. Richard Callard was on the Board and knew 8 what was going on for months with steps towards sacking 9 Second Sight and the closure of the Working Group, but 10 he did not tell me. I was repeatedly advised in 11 briefings that it was an operational matter, so not one 12 for me to be involved in, but looking back it was not 13 clear that the [Post Office] Board or anyone else was 14 conducting an adequate oversight function." 15 Did you discuss with the Minister whether she should 16 meet with Second Sight? 17 A. I may have done but I can't recall. 18 Q. Can you therefore not recall whether you gave advice to, 19 or not to, meet with Second Sight? 20 A. Yeah, correct. I can't remember. 21 Q. Did you keep the Minister informed of what she describes 22 as the steps towards the sacking of Second Sight? 23 A. Well, I think she says elsewhere in her witness 24 statement that I showed her a Board paper, I think, and 25 there is -- I can't remember it now but there is stuff 128 1 in my chain where you can see that this decision is 2 coming, and we appreciate it's a very difficult 3 decision. So I don't think the submission being put to 4 her on that -- I think it's 4 March 2015 -- it shouldn't 5 have come as a complete surprise because we were 6 essentially giving her some information that that was 7 what was going to be coming her way. 8 MR BEER: Thank you. 9 Sir, it's 1.10 now I wonder whether we might break 10 until 1.55. 11 SIR WYN WILLIAMS: Yes, fine. 12 MR BEER: Thank you very much, sir. 13 (1.11 pm) 14 (The Short Adjournment) 15 (1.55 pm) 16 MR BEER: Good afternoon, sir. Can you see and hear us? 17 SIR WYN WILLIAMS: Yes, I can, thank you. 18 MR BEER: Thank you, sir. 19 Mr Callard, good afternoon. I want to continue, if 20 I may, the topic of briefing or providing information to 21 ministers and whether there was any manoeuvring going on 22 within ShEx in the provision of information to 23 ministers. Can I start, please, with UKGI00002288. If 24 we look at the bottom email first, just to get the sense 25 of it, if we scroll up a little bit, please, thank you. 129 1 30 April 2014, from the private office of Jenny Willott, 2 with the subject "Jo Swinson transition from maternity 3 leave", and then there's an update that follows: 4 "... some plans in train to support Jo Swinson's 5 return from maternity leave." 6 Then if we go to the top email, please, you forward 7 that to some members, I think, of the ShEx team -- 8 A. Right. 9 Q. -- and say: 10 "Peter [Peter Batten]. See below, please can you 11 start putting some thought into this. Clearly we will 12 have our priorities to discuss, but you will have 13 a better idea of what her priorities might be than 14 I will, as we will have to address those as well. We 15 might also want to think about how many sessions we 16 might need -- eg I want to get her in the right place on 17 Sparrow!" 18 What place did you want to get the Minister in on 19 Sparrow? 20 A. I think that's a reference to the fact that I haven't 21 really, at that point, dealt with Jo Swinson at all; 22 I think I probably had one or two meetings with her, by 23 that point, before she left for maternity leave. And 24 I think -- 25 Q. What place did you want to get her to? 130 1 A. Oh, I'm sorry. I suppose I needed her to understand 2 that over the five months she's been away the Mediation 3 Scheme hasn't progressed very well and there are a lot 4 more problems, and I suppose I'm trying to explain to 5 her that that might require some difficult decisions 6 going forward. 7 Q. If that was your intention you would have said, "I want 8 to provide some information about what has gone on in 9 the last five months", whereas you say, "I want to get 10 her in the right place". That suggests you want to move 11 her to a position or position her in relation to 12 Sparrow; do you agree? 13 A. I can see why you think that and I quite possibly did 14 want to get her in the right place, I -- 15 Q. What was that place? 16 A. I think that's getting her ready to understand that 17 there may be some difficult choices coming because the 18 Mediation Scheme that she left, I think, had been 19 running, you know -- there was optimism that it might 20 work by, you know, November/December. By the time we're 21 in the end of April, it's really not in the good place 22 at all. We've had a letter from Sir Alan Bates on 23 16 April, clearly expressing unhappiness with it. The 24 subcommittee of the -- the Sparrow Subcommittee, which 25 I've just joined, is already thinking about how to deal 131 1 with the sort of Second Sight problem of this, you know, 2 capacity to get cases through to the Working Group. 3 She needs to understand that and she needs to 4 understand that there may be a difficult decision coming 5 up. 6 Q. To what place did you want her to be in? 7 A. Well, I didn't want her to be in a particular place, 8 I just wanted her to understand that things hadn't gone 9 very well and there may be difficult decisions to come 10 up. 11 Q. Is that all we're to read into "getting the Minister 12 into the right place"? 13 A. Yes, I think so. 14 Q. Did you ever try and manoeuvre ministers into 15 a position? 16 A. I'm not quite sure what you mean by "manoeuvre" but -- 17 Q. Persuade, cajole, by the provision or non-provision of 18 information? 19 A. As a civil servant, you are constantly tying to provide 20 advice, the best advice you think in your judgement, to 21 ministers and you provide information on that basis and 22 advice on that basis, whether that's manoeuvring or not, 23 manoeuvring makes it sound rather sinister. It's not, 24 you're just giving the best advice, as you see it, based 25 on the information that you're getting at the time. 132 1 Q. When you are getting the minister in the right place are 2 you acting as the Post Office NED? 3 A. No, I'm acting as -- 4 Q. Got a different hat on, on this occasion? 5 A. Yes, because I'm talking to my team and saying "Look, 6 can you put together some thoughts on the transition, 7 please, got to get priorities discussed. Peter knows 8 her better than I do because I've only met her once or 9 twice because she left on maternity leave. I'm asking 10 you to think about how many sessions we might need 11 across the Post Office portfolio, including there's 12 a tough, you know, there's now a tougher gig on Sparrow 13 than you left it". 14 Q. Can we move forward to a different Minister and 15 a different time, UKGI00005261, and start with page 2, 16 please. Scroll up, and again please. Thank you. 17 4 August 2015, "Sparrow catch-up". You're emailing 18 Paula Vennells' Executive Assistant, Ms O'Farrell and 19 you copy in Laura Thompson, Tom Wechsler and Mark 20 Davies, and you say: 21 "Hi Avene -- we had a catch-up with Lady 22 Neville-Rolfe today about Sparrow. Paula is seeing her 23 Thursday morning first thing (ish) and I thought it 24 might be worthwhile me having a chat with Paula for five 25 minutes over the phone tomorrow if there is time -- 133 1 I appreciate it's her first day back but grateful if we 2 could find a slot, it's worth her being aware of 3 [Baroness Neville-Rolfe's] mood and position (not that 4 there's too much to worry about)", et cetera. 5 Then scroll up, please. Mark Davies emails three 6 minutes later saying he's added Jane MacLeod in: 7 "... it would be good to catch up on this: we are 8 meeting with Paula tomorrow to discuss the meeting so if 9 it isn't possible for you and Paula to speak before 10 then, can we (myself or Jane) grab a word?" 11 Your reply to Mark Davies: 12 "... Sure, happy to chat", et cetera. 13 Why did you consider it appropriate to advise the 14 Post Office of the Minister's mood and position in 15 advance of them meeting with her? 16 A. Because ministers and the likes of Paula Vennells would 17 only see -- meet each other occasionally. So when that 18 happens, you want it to be as effective as possible on 19 both sides, so that what's discussed is what each party 20 wants to be discussed. It's a bit like a high-level 21 diplomatic meeting, almost. So you want both sides to 22 be relatively well briefed so that the -- that Paula and 23 Jane, who were taking Baroness Neville-Rolfe through 24 quite a detailed picture on Sparrow, answer the 25 questions that I understand BNR has at that point, to 134 1 make sure that it's a good use of everybody's time. 2 That's not unusual in Government. 3 Q. Did you make the Minister aware that you intended to 4 forewarn Paula Vennells of her, the Minister's, mood and 5 position in advance of the meeting? 6 A. I'm not sure if I did but, as an experienced minister, 7 I would expect BNR to think that would be -- that 8 would -- 9 Q. Ie you would tip off the Post Office as to what the 10 Minister was thinking before she met the Post Office? 11 A. Well, "tipping off" is perhaps the wrong phrase but, 12 yes, I would make sure -- 13 Q. Tell them about her mood and position? 14 A. Yes, because I want them to address it. This is 15 an opportunity for -- it was quite a key meeting, if 16 I recall. It was a 30-page slide show, I think they 17 had, and this was a key -- and Baroness Neville-Rolfe is 18 pretty new in role, and this is a key opportunity for 19 both to meet each other and to understand one of the 20 issues that's really bothering the Minister, and the 21 best way to deal with that is to explain to Post Office 22 what it is that the Minister is worried about, not that 23 there is much that she's worried about, as I say down 24 there. 25 It's to make an effective use of time and it's not 135 1 dissimilar to approaches, I think, across Government, 2 otherwise you get meetings where people talk at cross 3 purposes and it's a waste of time. 4 Q. Which hat were you wearing: the NED hat or the other 5 one? 6 A. I think I am wearing my shareholder hat here. This is 7 not dissimilar to what I've done on other assets and not 8 dissimilar to what my colleagues do on other assets. 9 Q. Did you think you were in a conflicted position here at 10 all? 11 A. Not in this particular instance, no. 12 Q. So did you speak with Mark Davies or Jane MacLeod or 13 Paula Vennells? 14 A. I can't remember. I may well have done. 15 Q. So you didn't ask the Minister whether she was content 16 for you to share information about her position to the 17 Post Office senior executives before they met? 18 A. I doubt I did. I would expect her not to have worried 19 about that because she wants the answers to her 20 questions. If I'm ensuring that she gets those answers 21 from the people she is meeting, that is a good use of 22 everybody's time. 23 Q. In fact, she says -- I'm not going to display it on 24 screen but it's paragraph 102 of her witness statement 25 at WITN10200100 -- this is email chain: 136 1 "... seems to me to be clear evidence that the ShEx, 2 whose role it was to provide me and other ministers with 3 the objective and impartial advice to scrutinise Post 4 Office's actions and hold it to account, was in fact 5 taking steps to provide advance warning to Post Office 6 about my concerns and intended direction of travel. 7 I cannot see any good reason for them to have done so 8 and am sadly driven to the conclusion that ShEx ..." 9 On this occasion, it's you. 10 A. Yeah. 11 Q. "... and Post Office, perhaps inadvertently, were 12 working together to try to deflect me and that ShEx were 13 not giving me the independent and impartial advice that 14 I needed." 15 Is there any substance in her criticisms of you? 16 A. I don't think so. I'm saying below that I don't think 17 there's much to worry about, at that point. All I'm 18 trying to do is do what other people do, and we've done 19 on other assets and my colleagues do, is to make sure 20 that it's the best use of time. 21 Q. So Baroness Neville-Rolfe has got the wrong end of the 22 stick here when she says that it appears that ShEx were 23 working together to deflect her, and you were failing to 24 give her impartial and independent advice? 25 A. Well, in my view, in this meeting, she has got the wrong 137 1 end of the stick because, actually, this meeting is 2 an opportunity for Post Office to directly, so it's 3 don't take my word for it, as it were, Minister, it's 4 a chance for Post Office to directly present to the 5 Minister for her to make an assessment. I'm just asking 6 Post Office to make sure that they address the very 7 things that she is worried about. Not that I think 8 she's got a great deal of worries because, as I said, 9 there's not much to worry about. 10 Q. At the time, did you know or did you have any suspicion 11 that she may not have trust the advice she was getting 12 from you and other members of ShEx? 13 A. No, I didn't have a reason to believe that. 14 Q. Can we look at UKGI00005195, please, an email to you 15 from Laura Thompson of the 3rd -- so in the run-up to 16 the meeting on the 6th -- 3 August 2015: 17 "Just spoke to Harriet." 18 Can you recall who that would be? 19 A. I think she's another person in private office. 20 Q. Private office. Okay: 21 "She thinks [Baroness Neville-Rolfe] wants a senior 22 official outside of ShEx and not including whoever we 23 get from Legal but is going to go back with the proposal 24 that just three of us plus Legal and see what the 25 Minister says." 138 1 Did you, therefore, in fact, know that Baroness 2 Neville-Rolfe wanted, I think, attendance from somebody 3 or advice from somebody out side of ShEx. 4 A. Yeah, I did know because I had that email. 5 Q. Yes. 6 A. I don't think I would equate that with the last email 7 about briefing -- ensuring Post Office come armed with 8 the answers that Baroness Neville-Rolfe -- 9 Q. Do you know why Baroness Neville-Rolfe wanted somebody 10 from outside ShEx to help her? 11 A. I think this goes to the shareholder versus policy role, 12 where, at the time, we were both policy officials and 13 shareholder role officials, and I think quite sensibly 14 she's identified that sometimes those things can clash. 15 I think what we're saying here is she's expressed 16 a request for that, we've said well, we do both roles at 17 the moment. 18 Q. Were you involved in formulating that pushback to the 19 Minister? 20 A. Er -- 21 Q. "No, you shouldn't get somebody from outside ShEx"? 22 A. No, I don't think so. 23 Q. That's just Laura Thompson's view. 24 A. Yes, I don't know what the email down -- well, the email 25 below possibly is that's where the request comes and 139 1 Laura is responding to that request by phoning private 2 office and then relating to me what that conversation 3 was. But I mean, asking us to recommend someone else, 4 well, we had legal coming and I'm not sure who else in 5 the Department would be able to give her the advice she 6 needs because we dealt with Post Office policies. 7 Q. Is this kind of thing a concern where your Minister is 8 saying, "I want a senior official outside your 9 organisation"? 10 A. Yes, I suppose so but I guess I didn't understand quite 11 the nature of her concerns and I wasn't sure what to do 12 about it, to be honest, because Legal -- 13 Q. Did she -- 14 A. Sorry, Legal were coming, we were taking a -- we'd end 15 up taking a more senior person from the Shareholder 16 Executive along, in the form of Anthony Odgers, I think. 17 But also I knew that in that meeting, which is the 18 internal meeting on 4 August, I knew that Special 19 Advisors were coming as well as BIS Legal. So there 20 were a range of people that were they're. I probably 21 didn't think it was necessary because there were so many 22 other people there, it wasn't just ShEx. 23 Q. Who wins today here, ShEx or the Minister? 24 A. Well, if the Minister has got issues on that front and 25 she isn't happy with Laura's proposal, because private 140 1 office are saying, "I'll take that back to the 2 Minister", then she's more than welcome to go to the 3 Permanent Secretary and say "I'm not happy". 4 Q. Do you remember what happened: did ShEx in fact prevail 5 and she only got advice from ShEx? 6 A. I don't think it's a case of prevailing. I think we've 7 said "Well, we can't give you advice as to who else you 8 should have", we turned up at the meeting as planned. 9 I don't recall anybody who was -- 10 Q. Outside of ShEx? 11 A. Oh, no, well, there was BIS Legal, there was Special 12 Advisers, they're both outside of ShEx. 13 Q. Does this happen often, that ministers indicate that 14 maybe they're not trusting the advice they're getting? 15 A. I think -- not that I'm particularly aware of, no. 16 Q. Did it cause you any concern? 17 A. No, it perhaps should, on reflection, have caused me 18 more concern than it probably did. 19 Q. Can I turn to a different type of concern, namely 20 concerns over Paula Vennells. Can that document come 21 down from the screen, please, and can we look at your 22 witness statement, please, paragraph 49, which is on 23 page 23. Paragraph 49, please. You say: 24 "I recall that, at the start of my tenure ... there 25 were some concerns about [Ms Vennells'] suitability as 141 1 CEO. These were initially explained to me by my team 2 and, as far as I can remember, these concerns 3 crystallised during an away day in June 2014, at which 4 [she] was felt by many members of the Board [including 5 me] to be overly passive and acting more like a NED than 6 a CEO in the way she interacted with member of her team 7 who came to present an item on the agenda." 8 That's essentially what you've told us a couple of 9 times already today. 10 A. Yeah. 11 Q. "A contemporaneous summary of the Board's concerns is 12 set out in a note that I prepared in August 2014, ahead 13 of a meeting with the Minister, which I shared with the 14 Minister's office and which Alice Perkins had also 15 reviewed." 16 We have looked at that one earlier, the one in the 17 informal -- 18 A. Yes. 19 Q. "By this time, Jenny Willott MP had replaced Jo Swinson 20 MP whilst Jo Swinson MP was on maternity leave. The 21 concerns were" -- 22 A. And we corrected -- 23 Q. -- "summarised in the following terms", and then there's 24 a quotation from the document we've looked at. 25 A. Apologies, but we've corrected that line at the start -- 142 1 Q. Exactly. 2 A. Yeah. 3 Q. To what extent were those concerns that you express in 4 this paragraph discussed and shared with Alice Perkins? 5 A. By this time, which relates to the meeting we were 6 preparing for with Jo Swinson, that had been discussed 7 with Alex -- definitely discussed with Alice Perkins, 8 because it was -- I think there's been growing rumblings 9 in the Board up until about a June away day, and then 10 the June away day happen and that kind of crystallised 11 everything, combined with the CFO issue, meant that 12 there was active discussions going on. 13 Q. For how long had those concerns been held? 14 A. By me or by -- 15 Q. Yes, by you. 16 A. Well, it's difficult to say, because I was -- I got 17 briefings from the team very early on but hadn't 18 obviously formed -- had the chance to form my own 19 judgement -- 20 Q. So the note is August '14, you began in early '14? 21 A. In January '14, yes. So I guess they built over time, 22 and then you take soundings from other NEDs and you get 23 a sense of it and you've seen -- one has seen by that 24 time performance in Board and that sort of thing, so it 25 sort of grows and then these things tend to have 143 1 an event that crystallises consensus at a Board, if you 2 see what I mean. 3 Q. Was that a unanimous or majority view held on the Board, 4 in particular that Ms Vennells was "overly passive and 5 acting more like a NED than a CEO"? 6 A. I think so, yes. 7 Q. Unanimous or majority? 8 A. To be honest, it's not one of those things that you hold 9 a vote on but I don't think there were any dissenting 10 voices in that sense. 11 Q. Can we look, please, at UKGI00006547. Scroll down, 12 please. Thank you. We're now in spring 2016, and can 13 you see an email exchange concerning Post Office 14 Limited's IT renewal -- 15 A. Yes. 16 Q. -- including you or members of ShEx speaking? 17 A. Yes. 18 Q. If we scroll up, please. Further exchange. This is 19 about a different issue, not Horizon, correct? 20 A. I think it concerns Horizon in the sense of a renewal of 21 the contract, yes, but not -- 22 Q. But with Fujitsu but not -- 23 A. But it's not a Sparrow thing -- 24 Q. Right. Then scroll up. Mr Russell says to you that he 25 mentioned that issue with Howard: 144 1 "As I was doing so, Paula ambushed us." 2 You reply: 3 "Told you, there's something 'Teflon' about her." 4 A. Mm. 5 Q. What did you mean by that? 6 A. As I tried to explain in my witness statement, I think 7 what I mean there is that the issue around the 8 reprocurement hadn't been handled very well, was going 9 to cost quite a bit of money and Mark's having the 10 conversation with Howard Orme, who was the CFO of BIS, 11 the Department at the time. And Paula obviously bumped 12 into them, because I think sometimes she was in the 13 building, and I'm not sure why I say "Teflon", I think 14 it's something to do with, well, perhaps she's almost 15 oblivious to the fact that there's a conversation going 16 on in the Department about a failed procurement that's 17 going to cost some money and -- 18 Q. Mr Callard, "Teflon" doesn't usually refer to somebody 19 who is oblivious. "Teflon" usually describes somebody 20 who manages to avoid criticism, to keep a good 21 reputation, even after they have done something wrong. 22 A. Yes, but -- 23 Q. They are impervious to blame or criticism and nothing 24 sticks? 25 A. Well, kind of, it's just -- I don't know how he -- how 145 1 she met them but, yes, she would come up and I guess 2 she's approached them and not necessarily acknowledged 3 that there's as much of an issue as she might need to 4 appreciate -- 5 Q. You're speaking more generally here that there's 6 something Teflon about her, ie criticism never sticks, 7 correct? 8 A. Possibly. That's possibly what I -- 9 Q. Was that your view? 10 A. I think that's quite a harsh view, I think I'm just 11 speaking off the cuff here that -- 12 Q. Sometimes when we speak off the cuff it reveals our true 13 thoughts, doesn't it? 14 A. Yes, possibly it does. 15 Q. So why had this situation been allowed to carry on, that 16 somebody who was "Teflon", ie criticism never stuck, 17 they were impervious to blame or criticism, they 18 maintained their good reputation, even though they had 19 done something wrong -- 20 A. Well, I don't think she'd done something necessarily 21 wrong it's just that something hadn't -- she's the CEO 22 of an organisation that the procurement hadn't panned 23 out as it should have done and it ended up costing some 24 money. It's not necessarily her fault and I think the 25 person who was in charge of IT ended up leaving the 146 1 business. As CEO, you know, she ultimately bears 2 responsibility for that but, at the same time, yes, 3 she's almost sort of oblivious to that in the way she's 4 approached Mark and Howard. 5 Q. So you saying that you meant "Teflon", in the sense of 6 oblivious? 7 A. In the sense of it's sort of water off a duck's back, 8 I suppose. 9 Q. I think it's right that, right from the early days of 10 your involvement in ShEx, ShEx's Risk and Assurance 11 Committee had expressed concerns about the continued 12 suitability of Ms Vennells as CEO, hadn't they? 13 A. Well, we'd taken that to the Committee to discuss but, 14 yes. 15 Q. Can we look at the record of the Assurance and Risk 16 Committee, UKGI00042124. If we look at the title at the 17 top, this is a Risk and Assurance Committee of who, of 18 what? 19 A. Of ShEx. It's the ShEx Internal Risk and Assurance 20 Committee. 21 Q. What was the purpose of the ShEx Risk and Assurance 22 Committee? 23 A. Well, it's to consider risks possibly in more depth. 24 I think the background to this was that we had done one 25 of our sort of -- some sort of portfolio review or 147 1 something in January where we'd raised this and they'd 2 asked us to do a deep dive on the options around the 3 Chief Executive and these are the notes of that 4 discussion. 5 Q. How frequently did the ShEx Risk and Assurance Committee 6 meet? 7 A. I don't know. This was -- I think a sort of outcome of 8 an initial -- of a portfolio review, which is 9 a quarterly thing that we tend to do at ShEx or did at 10 ShEx. 11 Q. Did the risk registers that we looked at earlier feed 12 into the Risk Committee? 13 A. Possibly, and the management and the quality of 14 management was on the risk register. 15 Q. I meant did the risk registers get taken to the Risk and 16 Assurance Committees? 17 A. I don't know because I wasn't on the Risk and Assurance 18 Committee. I'd only appear when it was a specific -- 19 specific to the -- a particular risk that I was 20 managing -- 21 Q. You're the presenting team here? 22 A. Yes, I'm presenting to a committee who are considering 23 our position and whether we're dealing with it properly. 24 Q. You were also an author or a signer-off of the risk 25 registers? 148 1 A. Yes. 2 Q. Did you know whether or not the documents you were 3 writing or signing off got sent to the Risk Committee? 4 A. I can't remember whether I knew that or not but I knew 5 that they would go to a risk team who would consider it, 6 and then the summation of the -- all of the risk would 7 then go, most likely, to a Risk and Assurance Committee 8 but they'd go to ExCo, the Executive Committee. 9 Q. If we scroll down, please. Paragraph 2: 10 "RC [you] set out that advice from the recent ShEx 11 Annual Review of [Post Office] was to consider the 12 continued suitability of the current CEO." 13 So there'd been a ShEx-wide annual review of Post 14 Office; is that right? 15 A. So yes, there'd be quarterly reviews and then there's 16 a one-off annual review, where the team presents to 17 a set of peers, who kind of review what we're doing, and 18 so risks across Post Office, and the issue of Post 19 Office would be presented to the -- risks and other 20 issues would be presented to the -- to a team of peers 21 at an annual review and a quarterly review. 22 Q. "There has been a general consensus that there is 23 an issue with the leadership of Post Office, however 24 there has only been anecdotal evidence. 25 "3. As the new Executive Director in ShEx for [Post 149 1 Office] [you] would now like to investigate this further 2 and is carrying out initial discussions with the Chair 3 and other [Post Office] NEDs. The committee suggested 4 that [you] continue to have regular catch-up meetings 5 with the NEDs as a matter of course. 6 "4. [You] also highlighted that there have been 7 issues between the Minister and the [Post Office] CEO." 8 Then forward to 5: 9 "The leadership role is in question due to the lack 10 of delivery of the current [Post Office] transformation 11 plan. This is their first CEO role and [Post Office's] 12 objective of being commercially sustainable is currently 13 being achieved. That said, the Network Transformation 14 is slower than expected but this is not necessarily 15 a fault of the CEO, further investigation will confirm." 16 Then over the page to 8: 17 "The Board has been in place for 16 months now and 18 their view on the CEO performance is mixed. The Chair 19 (who is also in her first Chair role) [that's Alice 20 Perkins] is still making a view. It has been suggested 21 that an independent Board review takes place. The 22 committee agreed that this would be a good idea and 23 confirmed that this should be an independent review." 24 Did that happen? 25 A. I can't remember. 150 1 Q. What would an independent Board review of the CEO's 2 position consist of? 3 A. I would imagine -- I don't actually know, to be honest, 4 I think it's probably a specific conversation amongst 5 NEDs to say what is our position. 6 Q. What steps in the absence of an independent Board review 7 -- and we've seen none -- did ShEx take to quantify or 8 evaluate whether there was any merit in the anecdotal 9 evidence that is mentioned in this note? 10 A. So I think that, after this meeting, the idea was to go 11 and talk to the NEDs in more detail, and I think it 12 ultimately culminates in a desktop study we asked 13 a recruitment firm to do, to see if there were any other 14 alternative candidates that would be better than Paula, 15 because it's one thing to say we're unhappy with the 16 performance or -- not necessarily unhappy with the 17 performance but we may think there may be someone better 18 out there, but the idea is to go and find out. So later 19 on, I think it crystallised around the June away day, by 20 July we're in a position where we're commissioning, or 21 seeking to commission, Egon Zehnder, who are recruitment 22 consultants, to do a desktop review who was out in the 23 market for slightly more remuneration than Paula. 24 Q. The answer essentially, do I summarise correctly, came 25 back no one, for the allegedly low pay? 151 1 A. Correct. The -- it felt that the -- it would be quite 2 hard to persuade ministers to part with Paula in return 3 for the cohort of people that had come through -- more 4 expensive cohort of people had come through. It would 5 just be more of a risk than keeping Paula in place. 6 Q. Essentially, did this issue continue to fester, 7 ie concern -- 8 A. Yeah. 9 Q. -- amongst the Board about Ms Vennells but no concrete 10 action taken? 11 A. Well, we took action in the sense of doing that summary 12 on behalf of the Board, and Alice, as I understood it, 13 continued to mentor her up until that point. So it's 14 one of those things with Non-Executives, there's sort of 15 rumblings and side conversations, and then it sort of 16 meets with a crescendo and then action is taken, which 17 is where we got to with Egon Zehnder. I mean, my 18 position at this point was -- look, my view is that the 19 CEO role of Post Office is very, very difficult. It's 20 not just a single business; it's a conglomerate of 21 different sorts of businesses, plus it's 22 a government-owned business as well, so it's highly 23 political. It's very hard to find anybody that would 24 run it really well, to be honest, in my view. 25 And, you know, as a new person to the job -- and 152 1 I can't remember what date this is -- I might not have 2 even seen her perform at a Board by that point. So 3 I was still early days forming a view and, really, a lot 4 of this was coming from my team, who I trusted and who 5 I'd worked next to for quite some time, so I knew that 6 they were good. But I was having to rely on the team 7 and wanting to take time to form my own judgement. 8 Q. Thank you. Can we turn to a separate topic, namely your 9 perception of the extent of issues or problems with 10 Horizon. 11 A. Yeah. 12 Q. Can we turn to paragraph 69 of your witness statement, 13 please, which is on page 35. You say: 14 "In general terms, I found it difficult to identify 15 the correct balance when it came to the appropriate 16 level of Government engagement on the Horizon issue. On 17 the one hand I thought it was clear Government should 18 not intervene directly in the Mediation Scheme or court 19 proceedings, but on the other this was clearly a matter 20 of public concern, often raised in Parliament and the 21 media, with which Ministers were required to engage. 22 There was also the general point that, from my 23 perspective, it was difficult to see what the Government 24 could realistically be expected to do in response to the 25 concerns that were being raised in the apparent absence 153 1 of a problem with Horizon, the stated decisions of 2 numerous different criminal proceedings ..." 3 Just stopping there, what do you mean by the "stated 4 different decisions of numerous different criminal 5 proceedings". 6 A. I guess, rightly or wrongly, I took assurance from the 7 fact that the courts convicted people beyond reasonable 8 doubt. I assume that's quite a high bar and -- because 9 there had been prosecutions by POL but, at the same 10 time, there had been -- it's the court that convicts, so 11 I took a degree of assurance that the courts had looked 12 at the evidence being put forward and, nevertheless, had 13 seen to convict, either by a jury -- 14 Q. Did you know how many cases had been taken to trial, 15 rather than guilty pleas for false accounting in 16 exchange for dropping a theft charge? 17 A. No, I didn't. I knew there was around about 50 18 prosecutions a year. 19 Q. Did you know the proportion of those where the court 20 had, in fact, tried the issues? 21 A. I didn't, but I knew that some people had pleaded 22 guilty, and -- 23 Q. So did you take assurance from that? 24 A. Yes, I did in some respects but, also, I knew that not 25 everybody had pleaded guilty and the court still found 154 1 fault and I think when I asked the question about when 2 you plead guilty, I was told, rightly or wrongly, that 3 the evidential basis still needs to be there for the 4 court to accept that plea. 5 Q. Is that right; who told you that? 6 A. I can't remember. 7 Q. Was it a lawyer? 8 A. It might have been. I don't know. I can't remember. 9 Q. Why were you asking whether there needed to be -- 10 A. I think it was -- 11 Q. -- proper -- hold on -- whether there needed to be 12 a proper evidential basis for a court to approve of 13 a guilty plea, irrespective of the plea of the 14 defendant? 15 A. Because I think it was in response to the point around 16 people had been pressured to plead guilty. So I was 17 wanting to -- it was part of my trying to understand the 18 extent to which one can simply pressure someone to plead 19 guilty, regardless of the evidence that's there. 20 Q. You continue: 21 "... and the unequivocal assertions by [Post Office] 22 that the issue had been exhaustively investigated and no 23 evidence of any problem had been found. I thought the 24 Government was in a difficult position in relation to 25 this issue and it was part of my job as a civil servant 155 1 to help ministers steer a path through these competing 2 considerations." 3 What was your perception of the reliability of 4 Horizon based upon? 5 A. It was based upon the fact that, throughout my tenure, 6 there was some sort of investigation going on, be it the 7 Mediation Scheme, be it the Parker Review or under the 8 auspices of the litigation. The fact that there had 9 been the Second Sight interim report that preceded me by 10 six months and the Mediation Scheme was ongoing at that 11 point, there had also been the Cartwright King/Altman 12 Advice, which, although it's not necessarily about 13 Horizon per se, is in -- is about the safety of 14 convictions and the evidence presented, and so that gave 15 me -- that gave me reassurance. 16 And then also, I suppose it's -- the information we 17 continued to get from Post Office was in a similar vein 18 and when we probed, we would get, you know, quite 19 detailed information, as I've said, around things like 20 the response to the Part Two Second Sight Report, the 21 response to Panorama, responses to debate -- the points 22 raised in debates would be quite comprehensive, quite 23 well articulated and, ultimately, I suppose, no one 24 seemed to have come forward, given Second Sight had 25 looked at all this, I didn't feel that they had 156 1 articulated a clear link between a fault with Horizon 2 that could explain the losses that subpostmasters were 3 suffering. That's kind of what I felt I needed to 4 understand and see. 5 Q. I think you accept that the Deloitte Zebra Report was in 6 part to the contrary effect: it revealed some relatively 7 fundamental problems? 8 A. Yes, I agree entirely, and I -- 9 Q. Just stopping there, that's not a document you ever 10 read? 11 A. I read the first one from 30 April. 12 Q. Yes. 13 A. I can't recall whether I read the Board Briefing from 14 4 June. If I did read it, I didn't understand the 15 significance of it but, reading it now, it feels like 16 I should have had understood the significance of it, 17 which leads me to believe I may not have read it either 18 way, I regret that, for some reason, that wasn't taken 19 to Board, it wasn't considered and it should have been, 20 because that is, I think, one of the key bits in my 21 timeline where we might have changed path. 22 Q. The other key bit would presumably be, in your mind, 23 Jonathan Swift's advice? 24 A. Well, the Parker Review, yes. 25 Q. Yes. 157 1 A. I mean, I think -- 2 Q. Well, in particular the advice? 3 A. Well, if I'd seen the advice and known what the advice 4 said, then, yes, I think that would have led to 5 a different path as well. 6 Q. So why is it that the two documents that would have led 7 to a different path are the two documents that you 8 didn't read or see? 9 A. Well, the Deloitte one remains a bit of a mystery. 10 I don't know why I didn't look at that or the rest of 11 the Board consider it, and that's one of my -- probably 12 my biggest regret on this whole thing. With Swift, it 13 sounds a bit daft but I never really -- I didn't really 14 think at the time that there was a Swift Report. What 15 I was interested in was the Parker Review, or the Parker 16 view. Swift contributed to that but, as I understood 17 it, Tim Parker was also talking to Second Sight, he 18 talked Lord Arbuthnot, he was talking internally, and so 19 what we wanted was the Chair's view, not a QC's -- not 20 the QC's view of it. We wanted it to be Mr Parker's 21 view. 22 Q. So it's coincidental, but for different reasons, that 23 two revelatory documents, the second Deloitte Zebra 24 Report and Jonathan Swift's advice didn't operate on 25 your mind to potentially lead to a different outcome? 158 1 A. That's correct, I missed the Deloitte report but 2 I wasn't informed that the Swift Report even existed and 3 I had a letter that I found reassuring from Tim Parker, 4 which didn't point to the issues that were being raised 5 or at least not all of them, the important ones, in the 6 Swift Report. 7 Q. Thank you. Can we look at UKGI00019720, please. Thank 8 you. If we scroll down, please, an email from Laura 9 Thompson to three members of ShEx, including you, 10 "Readout from [Jo Swinson's] office on Sparrow": 11 "Just had a chat with Claire ..." 12 Would that be Claire -- 13 A. In Swinson's office, I think, probably. 14 Q. Another -- 15 A. Another -- 16 Q. Private office? 17 A. I suppose it's the same Claire as the Claire before. 18 Q. Thank you. 19 "Apparently Jo wasn't overly happy with it -- she 20 feels she wasn't fully aware that [Post Office] were 21 terminating Second Sight's contract, or that the 22 publication of the Second Sight Report was so imminent. 23 I explained ... that the original advice did say that 24 'this means POL will be terminating their engagement 25 with [Second Sight]' and the Second Sight Report was 159 1 never due to be published and attempts to portray it as 2 such are misleading. 3 "We are probably going to have to go chat to on 4 Monday to cover off these points, before she'll sign the 5 letter ... 6 I think there might be merit in sending Arbuthnot 7 and Bates ..." 8 I think that's Mr James Arbuthnot -- 9 A. Yes. 10 Q. -- and Mr Bates: 11 "... a holding reply if we are not going to be able 12 to reply until next week. I'll talk to private office 13 about that when I hear back from Tara." 14 Then scroll up, your reply: 15 "Not sure I want to provide an interim reply to 16 Bates and Arbuthnot. It would imply we are thinking 17 about things (as opposed to just taking some time to 18 reply). 19 "Jo clearly didn't read the [submission]! Think we 20 need to stiffen resolve on Monday. Aside from giving Jo 21 Hamilton wads of cash [with a little bag of money] and 22 a full apology, which this doesn't warrant, then this 23 won't go away in the nice way Jo wants it to." 24 Does this email exchange disclose your true views 25 about Horizon here, that you thought this was a case of 160 1 subpostmasters unjustifiably after wads of cash. 2 A. Well, I address this in my witness submission where 3 I apologise to Ms Hamilton, and I'm very sorry -- 4 Q. Of course, everyone does -- 5 A. Yes, I know -- 6 Q. When their emails are brought up, they always apologise. 7 A. Yes, of course they do. Yes, of course they do. As 8 I explain this, I wasn't singling Ms Hamilton out, I was 9 making the point around hers was the more high-profile 10 case. What I'm trying to get at here is that I was 11 referred to earlier about the tough decisions that 12 ministers will have to make. As far as I'm concerned by 13 March '15, we had still not -- I have still not seen 14 a clear link with a bug in Horizon that generates a loss 15 to a subpostmaster. I've just not picked that up from 16 the Mediation Scheme or anything from Second Sight and, 17 without that, I feel that it's very difficult to provide 18 compensation to subpostmasters without that level of 19 evidence. 20 And what I'm talking about, in terms of stiffening 21 resolve, is that we put up what I thought was a very 22 clear submission on 4 March about how the closure of the 23 Working Group but the continuation of the Mediation 24 Scheme would work, including the arrangements around 25 Second Sight, to which Jo Swinson's office is expressing 161 1 surprise at, when I thought it was very clear in the 2 submission what the arrangements were. 3 Q. Does this disclose a dismissive attitude towards the 4 plight of individuals by you? 5 A. Possibly. I think it discloses my view that, from what 6 I'm hearing from Post Office, consistently, and what I'm 7 not hearing -- and I'm not hearing from Second Sight are 8 a particular clear link between the Horizon IT System 9 and losses being incurred by subpostmasters. There 10 doesn't seem to be a link and, therefore, I'm sceptical 11 of that position of the JFSA. 12 Q. Do you think that you, like perhaps others within the 13 Post Office Executive themselves, had rather forgotten 14 that, behind the campaign, lay individuals whose lives 15 had been destroyed by the impact of their criminal 16 convictions? 17 A. I hadn't forgotten that but I wasn't really sure what to 18 do about it because I couldn't -- as I've explained 19 elsewhere, I wasn't sure how Government -- what 20 Government could do to intervene. 21 Q. As the Shareholder NED, ought yours to have been the 22 role that retained an independent and enquiry mind? 23 A. Well, I -- what I was trying to do was make sure that 24 Post Office looked at the issues seriously and, as far 25 as I was concerned, that's what the Mediation Scheme, 162 1 the Cartwright King review, the initial Second Sight 2 review, had done, and also, actually, Deloitte review, 3 where we'd listened to Gareth James, I think his name 4 was, who came to Board. And so all of that led me to 5 believe -- wrongly -- that there wasn't an issue, and 6 that -- and the steps taken by Post Office had been 7 reasonable. 8 Q. Can I turn, lastly, to the Magnox report by looking at 9 UKGI00009275. You'll see this is a draft dated 10 25 October 2017 and, if we just scroll up to see the 11 badge and the title, it's described as an "Initial 12 review into UKGI's role in the competition, award and 13 challenge of the Magnox/RSRL decommissioning contract". 14 Can you tell us what this document is? It's not the 15 Magnox report itself? 16 A. No, I think what this is is a sort of lessons learnt 17 document, commissioned by UKGI in response to 18 a procurement within the Nuclear Decommissioning 19 Authority that went wrong. 20 Q. In brief, that procurement had gone wrong, and then the 21 litigation involving the -- 22 A. Yes. 23 Q. -- assessment of the procurement had gone wrong too? 24 A. Yes, so I think this was largely about the latter part, 25 I think, possibly. 163 1 Q. You tell us in your witness statement -- it's 2 paragraph 307, no need to turn it up -- that you were 3 aware of the lessons learned from this review? 4 A. Well, belatedly, but -- well, I don't know when I learnt 5 of the lessons of the review. This is from October '17, 6 which is towards the end of my tenure and its draft. 7 I'm not quite sure how of the findings got to me more 8 formally. I remember some sort of seminar at UKGI, 9 where they were sort of unveiled, I think. But I don't 10 know when that was. 11 Q. Can we look, please, at page 26 of UKGI's review and 12 under the heading "General lessons learned", if we can 13 scroll down, please, to 4.12: 14 "The general recommendations below are made ..." 15 Then, if we go over the page, please, the first 16 bullet point of substance on that page is the 17 recommendation that: 18 "Where large legal risks are involved, UKGI should 19 ensure that an asset's board has direct access to legal 20 advice and to the in-house Legal Team. Legal advice 21 should not be relayed to the board by the Executive 22 Team, as it was in this case. Misunderstanding/ 23 misconstruing legal advice was a material factor which 24 explained why the [Nuclear Decommissioning Authority] 25 Board was slow to respond in both the litigation and the 164 1 consolidation. Ensuring that an asset's board is 2 provided with the opportunity to discuss and challenge 3 legal risk directly with a General Counsel would 4 mitigate this risk, as would ensuring that the General 5 Counsel reports directly to the CEO." 6 Then if we scroll down, please, two bullet points 7 from the bottom: 8 "In holding the [Nuclear Decommissioning Authority] 9 Board to account, UKGI should utilise its own board and 10 its in-house legal function on consideration of risks. 11 To assist and develop its role in holding an asset's 12 boards to account, UKGI could make more use of the UKGI 13 internal risk management process to encourage discussion 14 and debate of the major identified and horizon risks 15 being faced by the assets it manages, especially by 16 drawing on the expertise of the UKGI Board and the UKGI 17 in-house legal colleagues." 18 If we go back, please, to page 25. Under "Lessons 19 learnt during litigation": 20 "Steps that UKGI can take to mitigate/address the 21 underlying failings which caused this issue going 22 forward: 23 "[1] Government should be made aware of and approve 24 key steps in substantial litigation. To ensure the 25 appropriate level of challenge and oversight of any 165 1 future large-scale litigation the NDA and other assets 2 face in the future, UKGI should recommend that framework 3 documents with assets require immediate notification of, 4 and Government approval for, litigation above 5 an identified threshold of 'substantial' liability by 6 reference to each asset's risk profile." 7 Then the last bullet point that we can see, as this 8 is displayed: 9 "Where a substantial legal challenge is mounted 10 against an asset, UKGI should assure itself of the 11 asset's internal legal capability." 12 Then scrolling down, last bullet point: 13 "Where the stakes are high, source more than one 14 external legal opinion. UKGI should insist that the 15 asset consider more than one external legal opinion to 16 ensure that legal advice and identified risks are 17 thoroughly tested. Further, it should ensure that any 18 opinions and their authors appear before the asset's 19 board so that the board is able to take strategic 20 decisions with proper calibration of legal risk." 21 Penultimately: 22 "Legal strategy and mitigation of risk must be 23 challenged. Throughout, the NDA Executive Team 24 portrayed the litigation as a 'try-on' and entirely 25 without merit ... litigation is universally recognised 166 1 to be uncertain, even a small risk of a very significant 2 setback requires mitigation. UKGI should ensure a full 3 discussion of the legal strategy to ensure risk 4 mitigation has been fully considered." 5 To what extent were those recommendations carried 6 into effect from October 2017 by UKGI? 7 A. So I'm not sure whether, as I said, when I would have 8 learnt of those recommendations because this is a draft 9 document, and so I'm not sure when those were released 10 but, by January 2018, the Board is putting a Litigation 11 Subcommittee in place and we're in discussions with Post 12 Office about the information-sharing protocol. 13 Q. When, to your knowledge, were any of the 14 recommendations, as a result of the Magnox Inquiry 15 carried into effect by UKGI? 16 A. To be honest, I don't know but it was -- by being on the 17 subcommittee -- that was -- I wasn't on the 18 subcommittee, Tom Cooper -- sorry, if I could step back. 19 Tom Cooper, by this time, at least not quite October but 20 by the end of 2017, had joined and I was working in 21 parallel with him. He was observing the Board so he was 22 going to -- we ended up nominating him to go on the 23 Litigation Subcommittee, rather than me, given that 24 I was stepping down in March. 25 So much of this would have been dealt with via the 167 1 Litigation Subcommittee, and we were putting in place 2 the information-sharing protocol so that we could -- and 3 I remember there was exchanges in my timeline around 4 getting second opinions, et cetera, so we were in 5 discussions with Post Office on doing that sort of 6 thing. 7 So we did, towards the end of 2017, into early '18, 8 the shareholder team took steps to implement this and 9 the General Counsel at the time was also heavily 10 involved. 11 Q. So all of these recommendations ought to have been acted 12 upon or either accepted or rejected and, if accepted, 13 carried into effect -- 14 A. Yes. 15 Q. -- by the time of the first hearings in the Group 16 Litigation? 17 A. Which were in November '18? 18 Q. Slightly earlier than that. 19 A. Oh, okay, right. So yes, they may well have been but 20 I stepped down in March '18 date. The subcommittee -- 21 the Litigation Subcommittee of the board was sort of 22 ramping up, as it were, and Tom was sat on that, not me. 23 We were getting updates. So they may well have been. 24 I was less sighted on that because Tom and I were sort 25 of transitioning over. 168 1 Q. Thank you. 2 So is your essential answer on that: this is more 3 for Mr Cooper to answer for than you? 4 A. Yes, I think so. I was involved with sum of it, and -- 5 but yes, it's probably more for Tom than me. 6 MR BEER: Thank you very much, they're the only questions 7 I ask, Mr Callard. 8 Sir, there are some questions from Core 9 Participants. 10 SIR WYN WILLIAMS: Mm-hm. 11 MR BEER: I wonder whether we might take the break now for 12 ten minutes until 3.05 and then recommence then. 13 SIR WYN WILLIAMS: Yes. Sure. 14 MR BEER: Thank you very much. 15 (2.54 pm) 16 (A short break) 17 (3.05 pm) 18 MR BEER: Sir, can you still see and hear us? 19 SIR WYN WILLIAMS: Yes, thank you. 20 MR BEER: Thank you. Sir, we've got three sets of questions 21 of about ten minutes each. 22 SIR WYN WILLIAMS: Okay. 23 MR BEER: Starting with Ms Patrick, then Mr Jacobs and then 24 Mr Henry. 25 SIR WYN WILLIAMS: Very good. 169 1 Questioned by MS PATRICK 2 MS PATRICK: Good afternoon, Mr Callard. My name is Angela 3 Patrick, I act for a number of subpostmasters who were 4 prosecuted and who have since had their convictions 5 overturned, including Mrs Hamilton. 6 I want to ask you about two things. First, one 7 document, and then a few questions about your role. 8 First, if we could look at POL00162786, I'd be 9 grateful. Thank you. Can you see that there now, 10 Mr Callard? 11 A. I can, yes. 12 Q. If we could start by scrolling to halfway down page 2, 13 please. We can see here there's an email from Melanie 14 Corfield circulating a press announcement from the JFSA. 15 Can you see that? 16 A. Yes. 17 Q. I don't want to look at the detail. You see there's 18 a big headline "JFSA prepares for Group Litigation 19 against Post Office", November 2015. The original email 20 isn't sent to you but if we can scroll up to the top of 21 page 1, we can see it eventually is forwarded to you, 22 and there's some exchanges. 23 A. Yes. 24 Q. You are engaged earlier but I just want to look at this 25 top part. You're replying, at that time, to Mr Davies, 170 1 Ms Thompson and Mr Bourke, and you say: 2 "Seriously though, do you know how many legal firms 3 they have had -- would be good to take the lines with 4 ministers that this is yet another sabre rattle, and 5 that once legal firms get into the evidence they pull 6 away." 7 A. Mm-hm. 8 Q. Was this another example of a frank conversation with 9 colleagues, Mr Callard? 10 A. This one actually is a "Seriously though, do you know 11 how many legal firms they've had?" Because I'm about to 12 provide advice to ministers and, if I'm a minister, 13 I would want to know -- I'd be concerned about 14 litigation and if there had been, you know, attempts 15 before that had failed, I might take a different view of 16 the litigation that's now in front of me than if that 17 hadn't have happened. I did -- I did bear in mind that 18 there'd been Shoosmiths, there'd been Edwin Coe and 19 others. 20 Q. Okay. "Another sabre rattle". 21 A. Yes. 22 Q. Had you convinced yourself that all lawyers would think 23 that the subpostmasters simply had no case? 24 A. By "sabre rattle", I mean, it's another -- so by the 25 time the -- it's November '15, so the Mediation Scheme 171 1 had come to an end and, essentially, I think, you know, 2 there was a -- the Post Office was essentially 3 disengaged, in that sense, because the Mediation Scheme 4 had completed. 5 Q. Can you just pause there for a minute and look at this. 6 Look at the language you use. 7 A. Yes. 8 Q. After "sabre rattle": 9 "... and that once legal firms get in to the 10 evidence they pull away." 11 You were asking for essentially that view to be 12 confirmed, weren't you? 13 A. Well, I was asking to -- the reason why I was asking, 14 because it goes down to others before them, as it were, 15 I'm saying "Seriously though, Mark, please, can you tell 16 me how many times litigation had been attempted", 17 because it's relevant when briefing the minister to know 18 how many times that had been attempted because she may 19 draw the conclusion that once, you know, you get into 20 litigation, you know -- the Shoosmiths -- 21 Q. Mr Callard, can I ask you to stop there? 22 A. Okay. 23 Q. "Would be good to take the line with ministers". 24 A. Mm-hm. 25 Q. You're asking Mr Davies to confirm that's the case, 172 1 aren't you? 2 A. Well, essentially, because I do think it's perhaps 3 another case where it might not come to anything because 4 the evidence I had seen to that point, no one has shown 5 me a causality between a bug in Horizon causing a loss 6 to subpostmasters. I hadn't seen anything like that and 7 so, therefore, I'm saying that's the sort of message 8 I might use to convey to ministers because it's 9 relevant. 10 Q. That sounds perfectly reasonable, Mr Callard, but look 11 at this message: 12 "Do you know how many legal firms they have had ..." 13 A. Yes. 14 Q. There's no question mark after that, is there? 15 A. Well -- 16 Q. It's a statement, isn't it? 17 A. Well, I can see why you think that but it's a very quick 18 email so I'm not putting a question mark at the end 19 because I then say it would be good to take the line 20 with ministers that -- 21 Q. Just pause there. Can I ask if the Document Manager for 22 today could scroll down so I can see the message that 23 I wasn't going to read but let's turn it up. Mark 24 Davies -- you can see there, I think, on your screen at 25 the bottom, your first reply to Mark Davies, which you 173 1 send on 20 November at 8.32. Richard Callard wrote: 2 "Oh joy, normal service resuming then!" 3 A. Yeah. 4 Q. "This is not saying that they have launched a class 5 action though is it, they are just 'preparing'." 6 A. Mm-hm. 7 Q. "And what happened to the other solicitors they signed 8 up -- it wasn't Freeths." 9 A. Yes. 10 Q. This is a frank conversation between colleagues, isn't 11 it, Mr Callard? 12 A. Well, it is but I'm asking a -- sort of making a genuine 13 point there because the previous -- I think it was Edwin 14 Coe that had been mentioned the previous firm involved 15 and that had come to nothing and I'd read the article 16 that said they're preparing, they'd not actually 17 launched, right? That's correct, is it? You know, I'm 18 trying to remind myself of what the other legal firms 19 that had been involved, what they were called. 20 Q. The first line was a statement, Mr Callard. 21 A. Yes, certainly, it is. 22 Q. You were saying your view that all lawyers will see 23 they've got no case when they look at the evidence. 24 That was your view you'd taken, wasn't it? 25 A. It was because I hadn't seen any evidence of causality 174 1 between Horizon faults and losses. I hadn't seen any 2 evidence of that, even though Second Sight had 3 researched it for two and had a half years and -- 4 Q. Okay -- 5 A. I'm sorry -- 6 Q. We -- 7 A. -- and my experience was that there had been failed 8 attempts at litigation. 9 Q. Okay, well, let's move on. The second issue I wanted to 10 ask you about was some general questions about your role 11 and the factors that were operating at the time you were 12 in post. They're very basic questions, I think. 13 Horizon was a business-critical system for the Post 14 Office, wasn't it? 15 A. Yeah. 16 Q. At the time you were in post, something the Government 17 wanted to explore was mutualisation for the Post Office. 18 You're nodding but, for the transcriber, you have to say 19 "yes" or "no". 20 A. Yes, sorry, I was looking -- up until about -- during 21 the Coalition Government, yes. 22 Q. But yes. It was a goal for Government to reduce the 23 public subsidy which the Post Office relied upon? 24 A. Yes. 25 Q. These were goals which the Board and the Executive at 175 1 the Post Office were working towards? 2 A. Yes. 3 Q. They were shared goals which you would have understood 4 as important with both of your hats on? 5 A. Yes. 6 Q. If Horizon could not be relied upon, that would that 7 have jeopardised the Government's financial goals for 8 the Post Office, wouldn't it? 9 A. Yes. 10 Q. Is there a danger that you focused too much on financial 11 implications for the Government in your role as 12 Shareholder NED? 13 A. Not with regard to Horizon. No. 14 Q. Those financial goals, weren't those what you were 15 primarily concerned with? 16 A. I was certainly concerned with financial performance and 17 financial goals, and reducing the subsidy that taxpayers 18 were putting in to the Post Office. But that doesn't 19 translate and wasn't a primary concern with regard to 20 Horizon. 21 Q. While you were looking at that, did you simply fail to 22 see the Government interest, the public interest, in the 23 broader sense of making sure that the innocent people, 24 the innocent people that were involved here, were not 25 prosecuted or being prosecuted in our country? 176 1 A. Prosecutions had -- you know, were obviously a concern, 2 that stopped before I got there. And I thought that -- 3 Q. Can I stop you there for a moment, Mr Callard. I wasn't 4 asking you what -- I was simply saying prosecutions had 5 stopped but was there not a wider governmental or public 6 interest in understanding whether a body that was wholly 7 owned by the State had been responsible for the unlawful 8 and unfair prosecution of innocent people under its 9 charge? 10 A. Yes, and the measures that we were getting Post Office 11 to take, including the Second Sight reviews and other 12 reviews, including the Cartwright King/Altman review of 13 prosecutions I thought were proportionate responses to 14 the concerns being addressed. 15 Q. Mr Beer has asked you a series of questions today and 16 I think you've accepted that you could have been more 17 curious? 18 A. Yes, I have. 19 Q. I want to ask you: did the awful, potentially awful 20 financial implications for the Government of these 21 subpostmasters simply being right blind you to the 22 potential that all of these ordinary, decent people, 23 supported by politicians of real conviction, might just 24 be right, and what you were being told by the Post 25 Office could be wrong? 177 1 A. The -- my position was not informed by the financial 2 ramifications of us being wrong. I would have just 3 dealt with that, like every other financial ramification 4 that we had from failed procurements to incorrectly 5 stated accounts, to overruns in Network Transformation. 6 So the financial considerations, we were clearly worried 7 it -- 8 Q. Is it possible that the fact that the failure of Horizon 9 would mean that mutualisation would simply not be 10 possible, is it possible that might have made you 11 a little incurious? 12 A. No, not at all. The mutualisation agenda was clearly 13 one that would take quite some time and mutualisation 14 was recognised as only being able to happen once 15 financial sustainability had been achieved. So you 16 can't be a mutual unless you're making profits and 17 you're financially sustainable. So it was not 18 an immediate -- it wasn't an immediate term goal because 19 it was clear that it would take some time for 20 mutualisation to take place and no designs as to what 21 mutualisation really means or would look like had really 22 been thought through by that point. So there was 23 a complete disconnect in my mind between mutualisation 24 and the Horizon issue. It just wasn't relevant. 25 MS PATRICK: Thank you, Mr Callard. I have no further 178 1 questions for you. 2 THE WITNESS: Thank you. 3 SIR WYN WILLIAMS: Mr Jacobs? 4 Questioned by MR JACOBS 5 MR JACOBS: Hello, good afternoon. Can you hear me? 6 A. Yes. 7 Q. Thank you. I act for a large number of subpostmasters 8 and postmistresses, represented by Howe+Co. 9 I want to ask you about something that arises from 10 paragraph 156 of your statement, which we don't need to 11 turn up for now and we will look at the underlying 12 document. So the document is POL00138251. This in 13 relation to your first attendance at a Sparrow 14 Subcommittee meeting on 9 April -- waiting for it to 15 come up on the screen. 16 Can we scroll down, please, or pause before we do 17 that. We can see the attendees at that meeting are 18 Alice Perkins, the Chief Executive, and you attended as 19 well, with Angela van den Bogerd, Chris Aujard and 20 Belinda Crowe. Was your role there as the Shareholder 21 Non-Executive Director? 22 A. Yes. 23 Q. Is that what you were doing at that meeting? 24 A. Yes. 25 Q. Okay. Can we scroll down, please, to the body of the 179 1 document. Keep going further, please. This is the 2 document that was provided to you and in bold type at 3 the second paragraph it says: 4 "The scheme [and this is the Initial Complaint 5 Review and Mediation Scheme] was established in August 6 2013 to resolve complaints in respect of the Horizon 7 system, on the basis that [in bold type] there were no 8 systemic problems with Horizon." 9 Now, were you aware that that statement was not 10 true? 11 A. In what sense? 12 Q. That the scheme was not established to resolve 13 complaints on the basis that there were no systemic 14 problems with Horizon? 15 A. Sorry, is your question that -- was I aware that the 16 scheme was established on the basis that there were no 17 systemic faults? 18 Q. That that was actually false? 19 A. Oh, well, I wasn't aware at the time that that was 20 false; I had the Second Sight Interim Report in my mind 21 that said exactly that. 22 Q. Well, there was a document, and we don't need to call it 23 up, but it was a document entitled "Post Office overview 24 of the Initial Complaint, Review and Mediation Scheme", 25 for the record that's POL00022120. It makes no mention 180 1 of the fact that the scheme was established on the basis 2 that there were no systemic problems with Horizon and it 3 actually says that Second Sight will determine 4 individual cases and will seek to look at whether there 5 was a problem with Horizon or any associated issue that 6 had an impact on subpostmasters. 7 So it was very much the remit of Second Sight, at 8 all stages -- and Ian Henderson gave evidence to this 9 effect -- to look for systemic problems with Horizon. 10 A. I mean, my interpretation of the Mediation Scheme and 11 the investigations involved with it was that the Interim 12 Report had found there were no systemic failures but 13 there were, nevertheless, subpostmasters who said there 14 is still a problem. So I thought a sensible reaction to 15 that, which pre-dates me, is that each individual case 16 should be investigated by Post Office, then Second Sight 17 and then go to the Working Group for potential 18 mediation. I wasn't really concerned about systemic 19 failures in that sense because I thought, well, a very 20 sensible way to look for problems with the system is 21 to -- rather than look top-down is to look at the things 22 that people are saying, and investigate those 23 individually. 24 And they may find problems with either are systemic 25 or aren't systemic, it doesn't really matter. They will 181 1 find -- if they find a problem, that's good because then 2 it will explain the loss. 3 Q. But that statement in bold type is not true and didn't 4 it strike you as odd that the Sparrow Subcommittee is 5 saying that a scheme, which is to include a Second Sight 6 investigation on the Horizon issue in individual cases, 7 wouldn't consider whether there was a problem with the 8 Horizon system? 9 A. Well, I didn't interpret it that -- in that way. 10 I think that -- I took the wording in bold just as 11 a re-assertion of the Executive's point of view, that 12 that's what Second Sight had found nine months prior, 13 and that was that. I didn't really -- I don't think 14 I would have read it that way or scrutinised it to that 15 extent. 16 Q. Can I just ask you to bring the microphone closer, we 17 have number of clients who are following remotely who 18 can't hear you. Thank you. 19 A. Sorry. 20 Q. So when Mr Warmington gave evidence in June, he 21 criticised the fact that the whole scheme was predicated 22 on the principal subject of the investigation of Second 23 Sight's investigation and the Post Office being the 24 paymasters, and what we see here in this document is the 25 Sparrow Subcommittee taking what is understood, probably 182 1 incorrectly, to be the interim findings of Second Sight 2 and translating that into the whole scheme, when the 3 whole scheme did not operate on that basis. 4 My question to you is: isn't that an example of the 5 sort of abuses that are inherent in a scheme where the 6 subject of an investigation is the paymaster? Do you 7 accept that -- 8 A. I can see why -- 9 Q. -- that was an issue -- 10 A. -- there might be a conflict in that sense but I got the 11 very strong impression that Second Sight were quite 12 independent and went about what they wanted to go about 13 without really worrying about what Post Office -- who 14 was doing the paying. And what I thought was happening 15 was that Post Office investigate, Second Sight 16 investigate, and that's exactly what was needed. I'm 17 not sure that I felt that the fact that the Post Office 18 were paying for Second Sight, though, was 19 a consideration for the Non-Executive -- as a Board 20 member, it's clearly a consideration, just like the 21 internal costs for Post Office were a consideration. 22 But I don't recall taking decisions at the subcommittee 23 on the basis of cost and costs alone. 24 Q. Mr Callard, as the Shareholder Non-Executive Director, 25 are you concerned that at your first Sparrow 183 1 Subcommittee meeting, which you attended as the 2 Government representative, the representative of the 3 owner, you were told in a document something that was 4 plainly untrue; doesn't that worry you? 5 A. Well, I didn't see it as untrue at the time. If you're 6 talking about the paragraph -- the sentence with the 7 bold -- 8 SIR WYN WILLIAMS: Well, I think I've got this point. 9 MR JACOBS: Yes, I was going to ask my final point about 10 curiosity and whether he asked about this at the time. 11 Perhaps if I could just conclude with that? 12 SIR WYN WILLIAMS: Well, I'm pretty sure he didn't, 13 Mr Jacobs. 14 MR JACOBS: Very well. 15 THE WITNESS: Yes, because I don't recognise that -- 16 MR JACOBS: Very well. 17 I don't have any further questions. Thank you. 18 THE WITNESS: Thank you. 19 SIR WYN WILLIAMS: Mr Henry? 20 Questioned by MR HENRY 21 MR HENRY: Thank you, sir. 22 Pannell Kerr Forster, Arthur Andersen and Deloitte 23 specialised in government and infrastructure. What was 24 your knowledge of IT systems before you became 25 Shareholder NED? 184 1 A. Very limited. 2 Q. Very limited. So it never occurred to you that 3 Horizon's failures did not have to be system-wide; they 4 could be intermittent, sporadic, random glitches. It 5 never occurred to you that those intermittent bugs could 6 be capable of causing losses for a small cohort of 7 subpostmasters? 8 A. It did occur to me, which is why I was reasonably 9 comforted by the investigations into each individual 10 case. So Interim Report says no systemic errors, 11 that's -- get that. But then, Post Office is still 12 looking at the individual cases where, as I said, 13 I wasn't really -- I didn't get hung up on the word 14 "systemic". If there's an error, what I hoped would be 15 found -- or not found, either way -- is a clear error in 16 Horizon that could be shown to cause a loss, whether 17 it's systemic or not or repeats or not. 18 Q. You had a growing number of subpostmasters who were 19 complaining but bugs, errors and defects -- using their 20 own language -- but that they were getting losses? 21 A. Mm-hm. 22 Q. You did not get a grip on that, did you? 23 A. I was looking for Post Office to get a grip on that and 24 what I understood the Mediation Scheme and the 25 investigations were about were about exactly that: 185 1 understanding what had happened at that particular -- 2 for that particular subpostmaster, which was 3 investigated by Post Office and then investigated by 4 Second Sight. So, to my mind, those instances where it 5 might be just single one-off were being investigated 6 and, if there was a problem, I hoped, with the 7 combination of Post Office and then Second Sight looking 8 at it, that that error would be found. 9 Q. We've heard that, at the end of this sorry tale in 2019, 10 Tim Parker said that 959 people had been prosecuted on 11 Horizon evidence. Did you ever ask for data and 12 statistics to explore the percentage of subpostmasters 13 who were being prosecuted apparently on the basis of 14 dishonesty? 15 A. That figure was provided at the first Board I observed 16 in February 2014. 17 Q. Did it not occur to you then that this is 18 extraordinarily high? 19 A. Well, I didn't consider it extraordinarily high. 20 I reflect, in hindsight, that I -- 21 Q. Why didn't you? 22 A. Well, hang on -- 23 Q. It's vastly over the normal norm of dishonesty in 24 a business. 25 A. Sorry, the percentage that I understand was 0.1 per 186 1 cent, which I should have benchmarked but it felt very 2 low because the Post Office is vast. And so there's -- 3 well, you've heard the 68,000 users, et cetera, 4 et cetera. The way I had it in my mind with regard to 5 the Mediation Scheme was that there were 136 6 subpostmasters, which spread over 14 years' worth of 7 Horizon's existence was 10 a year, versus 68,000 users. 8 And, in fact, there had been over almost 500,000 users 9 over those 14 years. So that figure didn't seem high to 10 me. 11 Q. But there were much more than 10 being prosecuted per 12 year. 13 A. Oh, sorry, I was talking about the -- yes, you're right. 14 Q. There were 40/50 people being prosecuted -- 15 A. 40/50, yes, which is less than 0.1 per cent. So that 16 didn't strike me as being particularly high. In 17 retrospect, I should have benchmarked it. 18 Q. Can I move on to the second point. Prior to becoming 19 the Head of the Shareholder Team and the Shareholder NED 20 for the Post Office, you were part of the Royal Mail 21 Shareholder Team. So you were aware of the background 22 of the conjoined asset, weren't you? 23 A. Yes. 24 Q. Were you part of the Royal Mail Shareholder Team during 25 the flotation? 187 1 A. Yes. I had two specific roles in that. 2 Q. Right. So what did you know, at that stage, about the 3 risk of wrongful prosecutions for which the Royal Mail 4 Group would have been held responsible and unjust civil 5 liabilities foisted on the subpostmasters; what did you 6 know, at that stage, in the run-up to the flotation? 7 A. I knew nothing about that because I was looking after 8 the State Aid application to relieve the pension fund 9 and I was dealing primarily with the set-up of the 10 Employee Share Scheme. 11 Q. In your career, however -- you are capable of expressing 12 an opinion on this -- the risk surrounding or emanating 13 from the postmasters' legals actions, their complaints, 14 ought to have been unequivocally stated pre-flotation, 15 shouldn't they? 16 A. It depends, I suppose, where the liability for those -- 17 for that action, where that lies, whether it was -- 18 because there was a lot of work to be done around how 19 one separates Royal Mail and Post Office. 20 Q. Take it from me that the liability would have lain with 21 Royal Mail Group. That is not in contention. 22 A. Okay. 23 Q. Now, that ought to have been unequivocally stated 24 pre-flotation, shouldn't it? 25 A. I don't know the listing rules, I'm afraid. So I don't 188 1 know. 2 Q. Well, can I ask you, please, about this. Mr O'Sullivan 3 was questioned about a document, the minutes of 4 a Shareholder Executive Board Meeting, from 13 March 5 2013, and various risks related to the RMG flotation 6 were discussed but nowhere at all did the ShEx Board 7 recognise the risk that Horizon prosecutions were, or 8 may have been, wrongful and presented a risk to the 9 flotation. Can you think of an explanation for that: 10 that the SPMs' wrongful prosecutions and unjust civil 11 liabilities escaped the ShEx Board's attention? 12 A. No, I suppose it depends on the -- it was before my time 13 on Post Office. It depends on what ExCo were being told 14 by the Shareholder Team at the time. 15 Q. So it would have depended upon that? 16 A. Well, yes, because -- 17 Q. Right. Right. 18 Do you accept, having reflected on your evidence and 19 what has been put to you today, that in your twin roles 20 as head of the Shareholder Team and Shareholder NED for 21 the Post Office, you lost all objectivity? 22 A. I don't think I lost all objectivity. I think what 23 I was doing was looking at the evidence that was being 24 presented to me, which included that it had been looked 25 at by Second Sight and the likes of Deloitte, which 189 1 I accept I missed, and making a judgement. 2 Q. You say you don't agree that you lost all objectivity, 3 but do you believe that your objectivity was markedly 4 compromised? 5 A. I'm not sure that I do. 6 Q. Well, let me put it to you that Sparrow was a cynical 7 containment strategy -- that's what it was -- and, in 8 fact, in internal documents by the Post Office, it has 9 even been referred to as a "containment strategy", and 10 you were part of that? 11 A. No, I wasn't, and the discussions I was party to at the 12 Board, it was very clear that the Non-Executive 13 Directors clearly wanted to understand whether their 14 Electronic Point of Sale System was safe or not. 15 Q. Can I take you to UKGI00019859. You did not write the 16 email that I'm going to take you to initially, which is 17 from Tim McInnes. 18 A. Yes. 19 Q. But he is writing about a meeting with Baroness 20 Neville-Rolfe and he states -- I'm not going to read out 21 the whole thing but, in general, there is a certain tone 22 of derision towards the Minister. But let's go to the 23 second bullet point: 24 "As she has mentioned before she thought that 25 Horizon was another example of a Government IT debacle 190 1 and that innocent subpostmasters were the victims. 2 Clearly this is wholly untrue in two respects, probably 3 untrue in a third." 4 Then: 5 "When Paula/Al were explaining things she jumped to 6 an understanding and it was difficult to bring her back 7 from that first impression/correct her." 8 Then I omit words but you can read for yourself the 9 remaining bullet points. 10 A. Mm-hm. 11 Q. Can I go to your response at the top, please. What did 12 you mean by "Positively Wilcox-ian"? 13 A. If you look at the first bullet point below, "There's 14 clearly still some confusion about what is Royal Mail 15 and what is Post Office". Baroness Wilcox was our Lords 16 Minister, and we often had to -- well, we had to explain 17 the difference between Royal Mail and Post Office, as 18 indeed we do with most people, including myself, before 19 I joined Government. People aren't clear. 20 Q. I see. So that's that they're both peas of the same 21 pod; Tweedledum and Tweedledee; they make the same 22 mistake? 23 A. No -- well, we're making the same mistake because, 24 before I joined ShEx, I didn't know the difference 25 between Royal Mail and Post Office, to be honest. 191 1 Q. The Minister, however, got it right, didn't she -- 2 A. She did. 3 Q. -- over that bullet point? 4 A. Yeah. 5 Q. But the whole team was there. It was you, it was 6 James -- is it Baugh -- 7 A. Baugh. 8 Q. -- Michael Dollin, Laura Thompson -- who obviously had 9 very close contact. This reflected the groupthink, 10 didn't it, that Horizon is safe, these postmasters are 11 on the take, or attempting to be on the take? 12 A. This is by what, June '15? By that point, there had 13 been almost three years of investigation into Horizon 14 and I'm -- 15 Q. I'm asking you about the groupthink. 16 A. Okay. 17 Q. I'm asking you about whether this reflects a cynical, 18 close-minded approach to the postmasters. 19 A. I think it reflects the data points that we'd received, 20 and the consistent reassurances that we'd had from Post 21 Office, and our understanding of the things we'd read 22 from Second Sight and the things I'd seen from Deloitte 23 by that point. 24 Q. So you were looking at it at a very high level as 25 befits, I suppose, your training as an accountant, that 192 1 it was the data; the humans who were expressing this 2 sorrow, they didn't count? 3 A. Well, they do count, of course they do. But I can only 4 see the -- I'm asking -- well, I can only judge it based 5 on the data that I'm seeing -- 6 Q. I see. 7 A. -- after three years of investigation. 8 Q. Can I go to another document, please, which is 9 UKGI00019531. Could we scroll up, please. This is 10 "Sparrow Questions", and we can see that it's in 11 December '14: 12 "... Patrick [it must be a reference to Bourke] is 13 holding the pen on this ..." 14 Then can we scroll further up, please, from you, 15 yes. Do you see the pro-penultimate paragraph which 16 begins "I would be happy to discuss these", and then it 17 says: 18 "Even if we don't speak publicly of some of the 19 questions needed in here, we still need the answers to 20 provide Jo privately with the confidence to rebut James 21 Arbuthnot's claims. Although we have kept her sighted 22 on the scheme, there has clearly been a limit to what we 23 could tell her given confidentiality reasons to date." 24 A. Yes. 25 Q. Here, the Minister is being used as a cannon to fire 193 1 your cannonballs, isn't she, even though she isn't fully 2 in the picture? 3 A. No, what this is a reference to is the confidential 4 nature of each mediation. It was agreed that details of 5 each mediation would be kept confidential because they 6 related to very personal circumstances, and Government's 7 point of view was always "We didn't really want to go 8 into that". 9 So the reference here is "we [can't] speak 10 publicly", is that where there are questions -- or where 11 there are points made by James Arbuthnot in the debate 12 forthcoming, we cannot rebut those or respond to those 13 using specific examples of specific cases because they 14 are confidential but it may be that in private we can 15 explain those to Jo, so she understands when she stands 16 up and has the confidence. 17 Q. You wanted short and punchy rebuttal of James Arbuthnot. 18 That's what this email says, doesn't it: 19 "It would be helpful if answers are short and punchy 20 ..." 21 A. Of course because -- 22 Q. Well -- 23 A. -- you have to have short and punchy responses in 24 a debate. But that's just the way lines are written. 25 Q. You have constantly, throughout my questions, talked 194 1 about, you know, that you were relying on Second Sight 2 and you were taking comfort from Second Sight, 3 et cetera, et cetera, et cetera. I suggest that that's 4 rank hypocrisy: you wanted to get rid of Second Sight, 5 didn't you, Mr Callard? 6 A. I felt that they were holding up the Mediation Scheme's 7 work because there were two of them versus 20-odd 8 investigators at Post Office. So that's why, in the 9 Sparrow Subcommittee, we were looking at those sorts of 10 things, because we were getting inbound letters from, 11 for example, Sir Alan Bates, saying it's not going quick 12 enough. Meanwhile, from our perspective, Second Sight 13 aren't getting through the cases. 14 Q. In fact, actually, nobody could have been prouder than 15 you when the mediation was brought to an end and Second 16 Sight were terminated; isn't that right? 17 A. Well, mediation wasn't brought to an end. 18 Q. Well -- 19 A. Well, hang on. So it's always mischaracterised as the 20 Mediation Scheme was stopped. The Working Group, which 21 was there to triage cases into mediation, was disbanded 22 because there was the presumption of mediation, which 23 is, as I understood it, a position that James Arbuthnot 24 and Sir Alan Bates had been calling for. 25 Q. Right. Well, let me rephrase it and, by the way, when 195 1 you said that Second Sight, there were only two of them, 2 they had more people working on it, and you, of course, 3 as well, were short resourced and so, therefore, other 4 people had to be brought in. 5 But let me go to my last document and I will finish 6 on this. It's UKGI00003792. Second Sight have been 7 terminated. It's been managed well in the house. There 8 hasn't been too much fallout, if any at all, in the 9 media following Prime Minister's Questions. 10 We can go through the whole of this but I'm sure 11 you're familiar with this email chain, so I'm going to 12 take it going straight to the top, after Alice Perkins 13 saying that Alwen Lyons, Neil McCausland, et cetera, 14 et cetera, Alasdair Marnoch, Mark Davies, et cetera, 15 have all done a brilliant job, "Mark and Jane ... 16 brilliant job", so Mark Davies and Jane MacLeod, 17 et cetera, et cetera, you write to Laura Thompson, your 18 colleague, and say: 19 "Let's just say that we are the unsung heroes!" 20 Your smug satisfaction that you had got rid of 21 Second Sight and that you had managed it so well in 22 Parliament -- 23 A. Well -- 24 Q. -- isn't that right? 25 A. I'd say there's two points on that. The first one is 196 1 Second Sight were retained to finish investigating all 2 of the cases in the Mediation Scheme and they were also 3 retained to finish off and publish their Part Two 4 Report; so that's the first point. The second point is 5 this was an off-the-cuff remark to Laura about how Alice 6 was thanking Mark for all the work he was doing in 7 managing the media and Parliamentary scrutiny that this 8 was going to get and didn't thank or didn't consider the 9 fact that Laura had been working long hours in the 10 background at the Government end. And that was not 11 a unusual occurrence where, you know, we'd be the first 12 to get moaned at by Post Office but we wouldn't get 13 thanked. 14 Q. I'm not concerned so much at Mrs Perkins' lack of 15 politeness or consideration towards either you or 16 Ms Thompson. It's reflecting, is it not, the fact that 17 this was your agenda, the two of you, "Let's just say 18 that we are the unsung heroes"? 19 A. It's -- 20 Q. That you were an integral part of the agenda to get rid 21 of Second Sight? 22 A. A decision had been made to -- in an effort to speed up 23 mediations that there be a presumption of mediation, 24 which -- 25 SIR WYN WILLIAMS: I think I've got this point as well, 197 1 gentlemen. All right? 2 Thank you very much, Mr Henry. 3 Questioned by SIR WYN WILLIAMS 4 SIR WYN WILLIAMS: I've got one question for you, or it may 5 be more than one. 6 Did I hear you correctly tell Mr Henry that at 7 either the first or one of the first Sparrow 8 Subcommittee meetings there were, you were actually 9 provided with the information that there had been 950, 10 or thereabouts, prosecutions in reliance upon Horizon 11 data? 12 A. No, what I said was that there's a Board paper -- the 13 Board -- the first Board I observed was in February '14. 14 The first item in that Board was a paper on the new 15 prosecutions policy. In that paper there was some 16 history and I think the statistic in there was that 17 there were 50 -- generally speaking, 50 prosecutions 18 a year, which equated to 0.1% of the users of Horizon, 19 or something like that. 20 SIR WYN WILLIAMS: I just want to be clear because did that 21 paper acknowledge, either expressly or impliedly, that 22 the 50 prosecutions per year were in reliance upon 23 Horizon? 24 A. I don't know. I think it was -- 25 SIR WYN WILLIAMS: Right, okay. 198 1 A. I think it was just about prosecutions generally and 2 what Post Office -- following the Cartwright King 3 review, where Altman had said it's anachronistic to 4 bring your own prosecutions, the Board that I was to 5 join was reconsidering that policy. 6 SIR WYN WILLIAMS: All right. That's fine. Thank you very 7 much. 8 I think that brings an end to the questioning, does 9 it not, Mr Beer? 10 MR BEER: Yes, it does, sir. 11 SIR WYN WILLIAMS: So thank you, Mr Callard, for your very 12 detailed witness statement and for answering questions 13 during the course of the day. The Inquiry and I are 14 very grateful that you have done that. 15 THE WITNESS: Thank you. 16 MR BEER: Sir, I think it's 12 noon on Monday, with 17 Sir Stephen Lovegrove. 18 SIR WYN WILLIAMS: That's my understanding, too. So we'll 19 adjourn until then. 20 MR BEER: Thank you, sir. 21 (3.48 pm) 22 (The hearing adjourned until 12 noon 23 On Monday, 15 June 2024) 24 25 199 I N D E X RICHARD JOHN CALLARD (sworn) ..................1 Questioned by MR BEER .........................1 Questioned by MS PATRICK ....................170 Questioned by MR JACOBS .....................179 Questioned by MR HENRY ......................184 Questioned by SIR WYN WILLIAMS ..............198 200