1 Monday, 29 July 2024 2 (9.45 am) 3 (Proceedings delayed) 4 (9.47 am) 5 MR STEVENS: Good morning, sir. Can you see and hear us? 6 SIR WYN WILLIAMS: Yes, thank you. 7 MR STEVENS: We're hearing from Mr McCausland this morning. 8 SIR WYN WILLIAMS: Yes. 9 NEIL WILLIAM MCCAUSLAND (sworn) 10 Questioned by MR STEVENS 11 MR STEVENS: Please could you state your full name? 12 A. Neil William McCausland. 13 Q. Mr McCausland, thank you very much for firstly providing 14 a detailed written statement and, secondly, for 15 attending the Inquiry to give oral evidence today. 16 I want to turn to that witness statement; do you have it 17 in front of you? 18 A. I do. 19 Q. For the record, that is WITN10290100. Can I ask you, 20 please, to turn to page 76 of that statement. Do you 21 see paragraph 203 and then beneath that a statement of 22 truth? 23 A. Yes. 24 Q. Then on the other side there's a signature; is it your 25 signature? 1 1 A. Yes. 2 Q. Are the facts stated in that statement true to the best 3 of your knowledge and belief? 4 A. Yes. 5 Q. Thank you, Mr McCausland, that stands as your evidence 6 in the Inquiry. It will be published shortly on the 7 Inquiry's website and I am going to ask you some 8 questions about parts of it. I'll start very briefly 9 with your background. Following various roles with 10 Marks & Spencer you became Managing Director of C&A in 11 1999? 12 A. Yes. 13 Q. You then became CEO of a government-owned business 14 called Navy, Army and Air Force Institutes between 2001 15 and 2002? 16 A. Yes. 17 Q. Was that your last executive role? 18 A. Yes, it was. 19 Q. Can I ask you to move slightly closer to the 20 microphones, please, so they pick you up. Thank you. 21 You've then held a number of Non-Executive Chair 22 roles between 2000 and when you joined Post Office in 23 September 2011. 24 A. That's correct. 25 Q. A pointer to 2011, at that point you joined Post Office 2 1 Limited as Senior Independent Director? 2 A. Correct. 3 Q. Did you know Alice Perkins before you were recruited to 4 Post Office Limited? 5 A. No, I had no knowledge of her at all. 6 Q. What was the time commitment for the role of Senior 7 Independent Director at Post Office? 8 A. I cannot quite remember. I have thought about that and 9 it isn't on my terms of reference. I think that it 10 is -- that it was three or maybe three to four days 11 a month. I think it was three days a month but it might 12 have been three to four days a month but I haven't got 13 a piece of paper that confirms it. 14 Q. Whilst you were a Senior Independent Director at Post 15 Office, did any other representative from Post Office 16 ask you questions about how much time you were spending 17 on Post Office matters? 18 A. Would you mind repeating that? 19 Q. Yes, of course. Whilst you were Senior Independent 20 Director at Post Office, did anyone else within the Post 21 Office discuss the amount of hours or days you were 22 spending at Post Office Limited? 23 A. Yes, it was a fairly frequent topic of conversation for 24 me and all of the NEDs, including Alice, in that all of 25 us were spending maybe double the amount of time that 3 1 we, in theory, should have been. Post Office was a very 2 time-intensive job. So I and all of the other NEDs were 3 spending more time and we did talk about that. 4 Q. So you rightly say your terms of reference don't refer 5 to time commitment. I think was it you said three to 6 four days a month was your expectation? 7 A. It was either three days a month or three to four days 8 a month. 9 Q. Does that mean, in practice, you were working between 10 six and eight days a month on Post Office matters during 11 interesting your time as Senior Independent Director? 12 A. That is about right. I would say two days a week. 13 Q. We don't need to turn this up on the screen but you give 14 a description of your role as Senior Independent 15 Director at page 3, paragraph 7 of your statement, and 16 I want to just raise some of them with you. The first 17 is that you say you were to assist with the development 18 1of Post Office Limited strategy -- 19 A. Yes. 20 Q. That effectively means analysing and considering the 21 future direction of the Post Office? 22 A. Absolutely. Post Office -- do you want me to expand? 23 Q. Well, you don't need to but if you've got something to 24 add, then please do? 25 A. Well, the Post Office that I went into was a very badly 4 1 run, very messy business. For the 10 years previous it 2 had had a very sharp decline in profitability. It was 3 losing -- the year before I joined it lost 120 million 4 in a year and that had been getting steadily worse. The 5 network had been shrinking, the infrastructure was old 6 and creaky and it was separating out from Royal Mail 7 Group. So it didn't have its own infrastructure and it 8 was about to get its own infrastructure -- it needed to 9 have its own infrastructure to stand alone and, 10 therefore, it needed to have a strategy to basically get 11 it back to profitability and make it a sustainable 12 business because it was not sustainable to keep going as 13 it was. So absolutely, developing strategy was 14 an important part of the job. 15 Q. When you say "creaky" infrastructure, what 16 infrastructure are you referring to? 17 A. Basically everything. The IT infrastructure, we knew, 18 was old and underinvested and creaky; the physical post 19 offices were under-invested. They were dark, barred, 20 fairly dingy places. So -- 21 Q. To cut across you, when you said the IT infrastructure, 22 are you including Horizon system within that? 23 A. Absolutely. The Horizon system we knew was near end of 24 life. I think it was 15 years old by that stage. Most 25 IT systems don't last more than 10 years. So we knew 5 1 that we had a clunky underinvested IT infrastructure, 2 which is why an awful lot of work went on during my 3 tenure to develop a new IT strategy which would end up 4 replacing Horizon and Fujitsu. 5 Q. You joined the Post Office in September 2011, yes? 6 A. Yes. 7 Q. So a year after Post Office and Fujitsu had rolled out 8 the Horizon Online system? 9 A. So a year after Horizon Online had been rolled out, yes. 10 Q. So, in those circumstances, why did you think that 11 system was creaky? 12 A. Because Horizon Online wasn't a rewrite -- wasn't 13 a whole rewrite of Horizon. Horizon was still Horizon. 14 It was basically a modified version of Horizon. It's 15 more like having an iPhone 15/iPhone 16 release. It's 16 not necessarily a whole new system. So Horizon was 17 still a clunky, not a particularly intuitive, not 18 particularly easy to use system. 19 Q. When you are using the word "creaky", are you using that 20 in a user interface way, rather than a technical way of 21 the integrity of the system itself? 22 A. Absolutely, yes. It wasn't easy to use. It wasn't 23 intuitive. 24 Q. One other aspect of strategy, presumably, would have 25 been to developing the Post Office's strategy in respect 6 1 of how it responded to complaints against the Horizon IT 2 system; would you agree with that? 3 A. Yes. 4 Q. Back to paragraph 7 -- as I say, we don't need to bring 5 it up -- another point you make is that you needed to 6 monitor performance and hold the Executive to account? 7 A. Yes. 8 Q. So when doing that, does that mean probing and 9 challenging the Executive on the work that they carry 10 out? 11 A. Yes. 12 Q. You also say ensuring the risk management system is 13 robust? 14 A. Yes. 15 Q. Does that mean, in effect, ensuring that or overseeing 16 the Executive in their identification, analysis and 17 mitigation of risk? 18 A. Yes. 19 Q. That would include risks arising from the integrity of 20 the Horizon IT system? 21 A. Yes. 22 Q. We're to look at that aspect in some detail this morning 23 but, before I do, could we have your witness statement 24 on the screen, please, at page 4, paragraph 9. At 25 paragraph 9 you set out some of your non-executive 7 1 roles. Can I just first clarify, does this list capture 2 all of the non-executive roles you held whilst at the 3 Post Office? 4 A. I am not 100 per cent sure that it does. That's saying 5 the companies I've worked for since leaving POL. 6 Q. Yes, if we look at Skin Clinics, for example, Joules, 7 Create Fertility? 8 A. Yes. 9 Q. Those at least have some overlap with your time as 10 Senior Independent Director. Let me ask it another way: 11 during your time as Senior Independent Director, did you 12 work at any other companies as a non-executive, other 13 than those listed here? 14 A. Again, I cannot remember the dates, so I certainly have 15 worked with companies which are not listed there before. 16 I cannot remember the dates of leaving some of those 17 companies as to whether they overlapped September '11 or 18 didn't. 19 Q. Well, let's just look at the ones we have here. Skin 20 Clinics, Joules and Create Fertility. Can you summarise 21 the time commitment that you had to give for each of 22 those companies as a Non-Executive Director? 23 A. Joules was three days a month; create Fertility, at that 24 stage, was very small, it was literally one clinic, so 25 it was probably two days a month; and Skin Clinics was 8 1 also three days a month. 2 Q. So did you feel that you were able to dedicate 3 sufficient time to the Post Office as Senior Independent 4 Director? 5 A. Absolutely. I mean, as I said earlier, I gave at least 6 double, you know, maybe more, the amount of time that, 7 in theory, I was meant to, but I never felt constrained 8 for time for Post Office. 9 Q. I'll move to my first topic I want to look at and that's 10 some of the assurances in respect of IT that you refer 11 to in your witness statement. Please can we go to 12 page 8 of the statement, paragraph 17. You say: 13 "I recall being assured by Ernst & Young's Audit 14 Partner (Angus Grant), the CFO (Chris Day), the COO 15 (Mike Young) and the Chief Information Officer (Lesley 16 Sewell), that the integrity of the accounting systems 17 was sound, albeit slow and clunky. Given that I am not 18 an expert in either IT or accountancy, I deferred to 19 their expertise on these issues." 20 When you said "the integrity of the accounting 21 systems", presumably there you're including the Horizon 22 IT system within it? 23 A. Yes. 24 Q. When you say "albeit slow and clunky", is that the same 25 as we discussed before: more of a user interface matter, 9 1 rather than a data integrity issue? 2 A. Yes. I was not of the understanding then that data 3 integrity was at issue. 4 Q. Can you recall the first time that -- I want to start 5 internally with the Executive -- that the CFO, Chris 6 Day, Mike Young or Lesley Sewell discussed with you the 7 Horizon IT system? 8 A. I think, if I go to the very first time that it was 9 discussed, it was probably actually Susan Crichton who 10 was doing the discussing, and that took place at a Board 11 before independence, so before I had even met Angus, and 12 at that Board, Les Owen, if I remember rightly, who was 13 still a Director of the Post Office Board at that stage, 14 had asked Susan Crichton about the Access 15 Legal/Shoosmiths letters, and had asked about the 16 strength of the legal claims, and Susan at that stage 17 reassured Les that their legal claims were weak and that 18 the -- there had been an audit done, which had been very 19 positive, and that that had been reviewed by an external 20 party, Deloitte, and also that there were no -- that in 21 all previous prosecutions where Horizon data had been 22 used, we had been successful. 23 So at the time, that was probably my first induction 24 into the integrity of Horizon data and, yeah, I was 25 listening to an experienced RMG Director talking to our 10 1 General Counsel, and there was a very clear, very robust 2 answer from Susan Crichton that the system was sound. 3 So that was probably the first time that Horizon issues 4 really came into my mind. But after that exchange I had 5 the impression that they were strong. As -- 6 Q. Yes, please, go on. 7 A. As we then became independent and had our first Audit 8 Committee meeting with Angus Young from EY, Ernst & 9 Young, and also there was an RMG internal audit report 10 that we looked at, then those documents made it clear 11 that they weren't questioning the data integrity at all 12 and they weren't even questioning the controls, but they 13 were questioning the documentation of controls. They 14 were basically saying that the documentation of the 15 controls was not as strong as it's needed to be. 16 There was a discussion with EY that it had taken 17 them longer to actually do the audit and that they had 18 not been able to rely on the documentation which existed 19 copied and, therefore, they had had to create some of 20 that documentation themselves, which had led to 21 an overrun in time and cost. 22 So data integrity wasn't an issue in my mind. The 23 controls had a small issue but the documentation of 24 controls had a large issue. 25 Q. Could we please just bring up page 68, paragraph 181 of 11 1 your statement -- just go down the page, please. You 2 can see it says: 3 "The Board were consistently provided reassurance by 4 a multitude of individuals -- many of whom had either 5 specialist IT or accountancy expertise -- that Horizon 6 was robust and fit for purpose. Examples of this 7 include ..." 8 Then if we turn the page, so I think you've 9 effectively, in your evidence, just summarised those 10 bits. 11 The first bullet point is the Board meeting on 12 12 January; the second is what you say are RMG/Post 13 Office's internal audit with the results reviewed by 14 Deloitte; then we have (3), the ISAE IT annual audit, 15 jointly commissioned by Post Office and Fujitsu; and 16 then (4): 17 "Ernst & Young (the auditors for [Post Office]), 18 regularly audited Fujitsu IT", and you go on to refer to 19 a discussion at the ARC audit, risk and compliance, 20 meeting on 15 May 2014. 21 Just so we're clear, are those the four matters you 22 were referring to in your evidence then? 23 A. Not quite. So I was referring to the first one, which 24 was Susan Crichton's assurances, which at the time 25 I believed. With hindsight, it becomes clear that 12 1 pretty much all of -- 2 Q. We are just going to come to those in a moment. 3 A. -- they were wrong. 4 Q. Just take us through -- 5 A. Yeah, okay, the second one I was referring to, the 6 internal audit, I wasn't referring to the ISAE 3402. 7 That came later. So, by this time, ISAE 3402 was not in 8 existence. However, as a consequence of those meetings, 9 we did force Fujitsu to introduce the ISAE 3402 which, 10 the followed year, did come into existence. 11 Q. Pausing there then, when you say you referred in your 12 evidence to Deloitte -- the audit taking longer, needing 13 to create your own paperwork, were you referring to what 14 we've heard as the SAS70 issue? 15 A. No. 16 Q. No. 17 A. So the -- in the first year that I saw the audit reports 18 and my first audit committee meeting with Angus Young 19 (sic) from EY, that audit had run for longer than it was 20 expected to run and had cost more and that was partly 21 because Horizon Online was new, it was partly because EY 22 had a new team who were doing the auditing but it was 23 significantly because the controls were not in place. 24 As a result of all of that -- as a result of all of 25 that, then that was one of the reasons why we were 13 1 saying it can't be right that this is the case, yeah, EY 2 shouldn't be needing to work that hard to do that. We 3 should be able to rely on our supplier to have a suite 4 of documentation that our auditor can simply look at and 5 test, rather than needing to construct it themselves. 6 And that is what led to the request to do SAS70 and 7 SAS70 then morphed into ISAE 3402. So, effectively, 8 they are one and the same thing. 9 Q. Did Mr Grant, the Ernst & Young Audit Partner, say 10 anything to you about the integrity of the Horizon IT 11 system in recording transactions at a branch level? 12 A. There was absolutely no comment from Mr Grant that the 13 data integrity was in any way compromised or poor. 14 Q. Alice Perkins gave evidence to the Inquiry on 5 and 15 6 June 2024 and her evidence was that she had 16 a conversation with Angus Grant during her induction, of 17 which she says she made a note. I want to bring that 18 note up, please. It's WITN00740122. 19 We see a Post Office notepad. Presumably you didn't 20 see this note until the Inquiry sent it to you? 21 A. Correct. 22 Q. If we can look halfway down, please, and it says, right 23 in the middle almost: 24 "With Fujitsu, [Post Office] drove a [very] hard 25 bargain on price but they took back on 14 1 quality/assurance." 2 Was that something you were aware of at the time? 3 A. I was not aware of that at the time. I subsequently 4 became aware, not of an issue relating to data 5 integrity, but of an -- there was an issue where we 6 had -- I'm trying to remember now. So later than this, 7 there were some customer incidents which affected 8 customers, where basically Fujitsu -- Horizon dropped 9 out and, when Lesley Sewell investigated that and 10 reported to the Board, the reason for that was because 11 the data -- we used to have two back-up data centres and 12 we'd moved to one, which I think had been a cost-saving 13 exercise in the migration to Horizon Online. So that 14 subsequently, I learnt, which was probably -- this might 15 have been what I was talking about: quality. But at the 16 time, I certainly had no knowledge that when Horizon 17 Online had been commissioned, we had -- RMG had driven 18 a hard bargain and there had been a reduction in quality 19 or assurance. 20 Q. Further down, it says: 21 "Horizon -- is a real risk for us. 22 "Does it capture data accurately. 23 "Cases of fraud -- suspects suggest it's a system 24 problem." 25 Alice Perkins' evidence was that this is something 15 1 Mr Grant had said, who raised a question as to the 2 accuracy of data being captured by Horizon, and then the 3 second point being referring to the claims of which you 4 became aware. 5 Did Mr Grant say anything along those lines to you, 6 around the time you joined Post Office? 7 A. No. I don't recall meeting Mr Grant before the Audit 8 Committee meeting, which was in 2012. So I don't 9 believe that I saw him in 2011, and when I did meet him 10 I had the EY report, and neither in his conversation nor 11 in the EY report does he say that he is worried about 12 data integrity. 13 Q. Did Alice Perkins raise or pass on any of this 14 information to you in the early days of being a Senior 15 Independent Director? 16 A. I have no recollection of her -- of her talking about 17 that. 18 Q. That can come down. Thank you. 19 Can we now look at -- I was going to go through the 20 sources of assurance that you referred to, and we'll 21 start with the Board meeting, I think you are referring 22 to the 12 January one. It's POL00021503. So we see 23 it's a meeting of the Board of Directors on 12 January, 24 and you are listed as present as the Senior Independent 25 Director. Please could we turn to page 6 of that 16 1 document and to the bottom, please. 2 So, as you said: 3 "Les Owen asked for assurance that there was no 4 substance to the claims brought by subpostmasters which 5 had featured in Private Eye." 6 Now, just pausing there, I understand it's your 7 evidence that, at this point, you were aware of the 8 claims through the Significant Litigation Report; is 9 that right? 10 A. Yes, the Significant Litigation Report had just been 11 published for the first time. 12 Q. But your evidence is you hadn't seen the Letter of Claim 13 by Shoosmiths Access Legal? 14 A. That is correct. The first time I saw those was in the 15 Inquiry. 16 Q. Again, your evidence is, at this point, you weren't 17 aware that one of the allegations was that Fujitsu could 18 access remotely branch accounts and either insert, edit 19 or delete transactions? 20 A. That is correct. 21 Q. I'm going to refer to that in shorthand as "remote 22 access" from now on. 23 A. Okay. 24 Q. It says: 25 "Susan Crichton explained that the subpostmasters 17 1 were challenging the integrity of the Horizon system. 2 However the system had been audited by RMG Internal 3 Audit with the reports reviewed by Deloittes. The audit 4 report was very positive." 5 Then at the bottom it says: 6 "Susan Crichton suggested that she clear the audit 7 report with the external lawyers and if it is possible 8 to give the report privileged status it would be 9 circulate it [sic] to the Board." 10 Did you ever see an audit report by Deloitte on 11 these internal audits? 12 A. No, I don't believe -- I didn't. I don't believe there 13 was an audit report by Deloitte, with hindsight. At the 14 time, clearly I didn't know that. But I don't believe 15 that there was one. 16 Q. Had you seen the RMG internal audit itself at that 17 point? 18 A. No, I hadn't, although I did see it subsequently. 19 Q. The RMG internal audit, is that -- a document we may 20 come to it -- but what's been described as an assurance 21 review and a series of slides showing an assurance 22 review? 23 A. Yes. 24 Q. Did you ask any questions at this stage about what the 25 internal audit investigated or its detailed findings? 18 1 A. I did not. At this stage, this was -- I was very new, 2 I was still absorbing and this was a conversation 3 between Les Owen, who had been on the RMG Board and 4 had -- they were the ones who had commissioned this 5 internal audit and this had been going on for some 6 months. So Les was asking Susan about it and the 7 interchange was between Les and Susan. 8 I was listening at this stage, absorbing, 9 assimilating, and, as I say, I came out of that 10 reassured -- wrongly, with hindsight, but at the time, 11 reassured -- that the Horizon system was good, good 12 integrity, and that the claims against us were weak. 13 Q. Finally, the comment: 14 "The Business has also won every criminal 15 prosecution in which it has used evidence based on the 16 Horizon system's integrity." 17 You may have said this in your evidence earlier but, 18 just so we're clear, who said that? 19 A. So Susan said, in answer to Les' challenge/question, 20 that -- she said exactly that, which again, with 21 hindsight I now know is wrong but at the time I didn't 22 know it was wrong, at the time I didn't question it. If 23 the General Counsel is talking to an existing RMG and 24 now POL Director in a Board meeting and says something, 25 I believe her. 19 1 Q. In terms of what you can recall now about her answer, 2 did she provide any other detail or any other context 3 around what we see recorded here? 4 A. I'm sure she did but I cannot remember it. This was 5 13/14 years ago and, inevitably, the minutes of a Board 6 meeting -- the Board meeting will last all day, and the 7 minutes are maybe eight or ten pages long, so the 8 minutes do not capture all of the conversation. So I'm 9 sure that there was a fairly large conversation around 10 that but I do not know any more than I can see from the 11 minutes. I cannot remember. 12 Q. Could we turn, please, to POL00021430. So this 13 a meeting of the Audit, Risk and Compliance Subcommittee 14 on 13 November 2012 and, again, we can see you are in 15 attendance and, at the bottom, we can see that Angus 16 Grant, the Audit Partner of Ernst & Young, is there, 17 along with another representative of Ernst & Young. 18 Can we please turn to page 4. If we can just scroll 19 down, please. So (e) refers to "AG". So it's Mr Grant 20 setting out matters about the audit. It says: 21 "He expected that 2012/13 would be a challenging 22 year for the Business in several areas because of 23 separation and major change, and that the audit would 24 need to focus on separation, pensions and taxation with 25 an overlay of IT." 20 1 He set out the method of doing it -- the focus, 2 sorry. Then (f): 3 "The ARC was comfortable with the approach, 4 alongside the separate ISAE 3402 IT audit [which we 5 referred to earlier in your statement] which had been 6 jointly commissioned by the Post Office and Fujitsu." 7 It says: 8 "The Chairman asked at what level of materiality the 9 E&Y team would report. [Mr Grant] explained this would 10 be similar to previous years. Although E&Y did put 11 a figure on [profit and loss] materiality, they would 12 propose to report any identified audit adjustments above 13 £600,000 to the Committee and, as a general rule, insist 14 on changes to the accounts for any single item or 15 accumulation of items with an effect of over 16 £5-6 million. This was accepted." 17 When you say you took assurance from the IT audits, 18 did that give you any assurance as to the integrity of 19 the Horizon IT system in recording data at a branch 20 level? 21 A. There wasn't a specific -- I cannot recall a specific 22 comment about that. However, EY would have spent a lot 23 of time at the -- Chesterfield, I think it was -- 24 accounting centre and, in order to sign off the 25 accounts, EY would have needed to ensure that they were 21 1 happy with the integrity of the accounting system, 2 including the branch accounting system and, if they 3 weren't, there would have been a discussion and there 4 would have been a matter of emphasis in the accounts. 5 Now, I cannot remember that happening, so I cannot 6 remember a specific discussion about branch accounting 7 but, inevitably, they will have done that in their 8 audit, and the fact that I can't remember it is probably 9 saying that it wasn't there as an issue. The issues 10 were the things that we primarily concentrated on. 11 Q. So I don't want to put words in your mouth; I'm just 12 trying to summarise what I think you've said. You can't 13 remember if there was a conversation on integrity of 14 branch accounts in respect of the audit? 15 I think that's a yes? 16 A. Yes. 17 Q. But it would have been your assumption that EY would 18 have satisfied themselves as to the integrity of the 19 accounting system, yes? 20 A. Absolutely, so -- 21 Q. But you can't help us with knowing what you may have or 22 may not have said or asked to satisfy yourself that that 23 was actually happening? 24 A. That is correct. So, at this stage, this is an audit 25 planning meeting, and then the audit results meeting 22 1 will take place subsequently. So here they're talking 2 about how they're going to plan it, then they will have 3 done the audit and then they will report on the audit. 4 And there is a detailed document for each, so after 5 it is document here, there will be a document which came 6 to the Board, not in the minutes, which will have spelt 7 out exactly how the audit was going to take place, which 8 we will have looked at and said okay, and that will have 9 included a large amount of work in -- at the 10 Chesterfield -- and forgive me if Chesterfield is the 11 wrong place -- but at the Chesterfield data centre. And 12 then the report will have come through and we will have 13 looked at that probably May time the following year, 14 once the audit had been done, and they will have 15 reported on all of their findings. 16 And all of their findings, the ARC, would then have 17 pored over and understood where there were problems and 18 then also made sure there was an action plan in place to 19 clear up those problems. And my name from the -- 20 throughout all of the years was that the issue was not 21 about data integrity; the issue was about controls and 22 specifically the documentation of controls, and the 23 first audit from '10/'11, they had quite a few findings; 24 the second one, in '11/'12, they had materially fewer 25 findings; and then by '13/'14 and '14/'15, they were 23 1 actually very complimentary about the controls and 2 documentation of controls, and the audit reports 3 specifically articulate that the level of controls has 4 improved very significantly over the period of time. 5 Q. Thank you. I want to move on, please, to look at the 6 appointment of Second Sight -- and we don't need to turn 7 this up -- but in your statement at paragraph 36, 8 paragraphs 98 to 100, I think you make the following 9 points, I just want to confirm them with you: 10 The first is that you say you were not involved in 11 the decision to instruct forensic accountant or the 12 selection of Second Sight itself? 13 A. Correct. 14 Q. You also say in your statement, paragraph 100 that: 15 "I was not involved in any discussion and/or 16 overseeing the drafting of the terms of reference for 17 Second Sight's investigation"? 18 A. Correct. 19 Q. Alice Perkins gave evidence to the Inquiry that she 20 spoke to you at some point -- she couldn't be clear when 21 but at some point -- about the appointment of Second 22 Sight. We're going to come to the Board meeting shortly 23 but can you recall any conversation outside of the Board 24 meeting with Alice Perkins concerning the appointment of 25 Second Sight? 24 1 A. I have no recollection of that. However, it is quite 2 possible that Alice did. I listened to Alice and 3 I think she was referring to her finding it difficult 4 within the business, in that she was getting pushback 5 from Mike Young and Susan Crichton, and so it is -- 6 I cannot remember it but it is perfectly possible that 7 Alice had a conversation with me that said "James 8 Arbuthnot is suggesting this, I think it's a really good 9 idea, I'm getting pushback in the business, what do you 10 think, Neil?" That would have been the sort of 11 conversation that we would have had and I would have 12 said, "100 per cent right, Alice, go for it. If you 13 upset Mike and Susan, so be it". 14 But I have no recollection of that, but it's 15 a perfectly feasible conversation. Alice spoke to me 16 about those things regularly. 17 Q. Let's look at one of the Board meetings where I think 18 you say it was the first time you can recollect Second 19 Sight or a forensic accountant being instructed? Please 20 can we bring up POL00021507. 21 Before we go there, we see 23 May 2012 and you're 22 present on the second line. Can we turn to page 8, 23 please. 24 So this is under AOB. It refers to Paula Vennells 25 and Alice Perkins updating the Board on the meeting with 25 1 James Arbuthnot and Oliver Letwin. At the end it says: 2 "The business had also agreed to use a forensic 3 accountant to investigate the system and give further 4 comfort to those concerned about these cases", referring 5 to the MPs' cases that they were championing. 6 We don't need to turn it up but in your statement, 7 page 36, paragraph 99, you say you do recall querying 8 whether they -- "they" being Second Sight -- had 9 sufficient manpower and sufficient expertise in IT to be 10 competent in undertaking a comprehensive review of 11 Horizon. The Board were assured that they were 12 sufficiently competent and that Susan Crichton had 13 worked with them previously and held them in high 14 regard. 15 At this stage, what type of investigation into the 16 Horizon IT system was being proposed by Paula Vennells 17 and the Chairman? 18 A. I think there was a degree of uncertainty at this stage 19 about what the scope of it would be and I have a vague 20 recollection of that, and it is only vague, but I came 21 back to it mentally several times in subsequent years, 22 which is why I do have a vague memory of it. So my 23 questioning at that Board was what are Second Sight 24 going to do, and are they good enough to do it? Have 25 they got enough resource to do it? Because they seemed 26 1 to be a two-man band and it was very unusual for Post 2 Office to appoint a two-man band to do anything. 3 Normally, we would apply -- we would appoint people with 4 large resource. 5 And the -- again, my memory is vague, but I think 6 that I was reassured that they were going to do 7 a review. They were not going to do a fully code-based 8 review, looking at all of the documentation and all of 9 the system. What they instead were going to do was to 10 take the cases that the MPs had given to them and 11 forensically understand what had happened to the money, 12 and follow -- find system faults through that way. So 13 if I have lost £5,000 -- if there is a loss of £5,000, 14 go through the forensic accounts and understand where 15 that has happened and, from that, identify problems with 16 Horizon. 17 So, rather than going bottom-up, looking at all of 18 the code, they would basically find the root cause of 19 those problems. So I think that was the discussion at 20 the time and I was reassured. I remember challenging it 21 but I remember also being reassured that Second Sight 22 had the capability and the capacity to do that job well. 23 Q. Could we look, please, at POL00096642. If we can go to 24 the bottom of that at page, please, we see there's 25 an email from Paula Vennells on 14 June 2012 to you. So 27 1 we've moved forwards a little bit in the chronology. It 2 says: 3 "Neil, good to see you earlier." 4 Then further down: 5 "The meeting with James Arbuthnot went completely to 6 plan. So well worth insisting on it, and making the 7 effort to go across. 8 "He has agreed to our TOR [I take it that's Terms of 9 Reference] and an individual rather than a blanket 10 approach." 11 Pausing there, when it's referring to an individual 12 rather than blanket approach, is that going to the 13 evidence you just gave: that it's looking at individual 14 cases rather than a code-up review? 15 A. Yes. 16 Q. Then, if we go up, please, to see your response, you 17 say: 18 "Paula it's always a pleasure to see you ..." 19 Further down: 20 "Well done with James." 21 That's presumably referring to Lord Arbuthnot? 22 A. Yes. 23 Q. So you agreed, presumably, at this point with the 24 individual approach rather than the overall code review 25 approach? 28 1 A. Yes. I did. Again, my memory is slightly vague but 2 I think that it was explained to me that because the 3 code -- the original code was so old and because it was 4 so different across the estate, that it would be almost 5 impossible and very expensive to do a proper code review 6 but that what Second Sight were recommending, ie take 7 the individual cases, follow the money forensically, 8 understand where the root cause of that loss had come 9 from, and my belief, then, was very clear that that 10 would be visible, as you went through the audit store, 11 so they would be able to track that down, they were 12 bright people, and from that, if then there were ten 13 instances where there'd been a problem with ATMs had 14 caused a £5,000 loss, that would then say, okay, there's 15 a problem with the system. So yes, I was happy with 16 that approach. 17 Q. Would you agree that, at most, what that would show was, 18 in an individual case, a loss may have been caused by 19 the Horizon IT system but it wouldn't show you if the 20 Horizon IT system as a whole had difficulties or 21 problems? 22 A. Not necessarily. If we were looking at 47 cases, then 23 if there is a reason behind them, I think you're 24 probably as likely to find it by following the money, 25 and really getting to the root cause of each of those 29 1 47, as opposed to doing a code-based review. So I'm not 2 sure that a code-based review would actually come up 3 with a problem either. So actually, it did seem 4 a reasonable way of understanding what that was. If 5 there was one, I'd absolutely agree with you but, if 6 you're looking at 47, then you should be able to 7 determine where there are themes which actually are 8 a common theme which are a problem/a flaw in Horizon. 9 Q. So was it your view, then, that if the 47 cases came 10 back and no problem was found on those 47 cases alone, 11 then that would have given the Horizon IT system 12 effectively a clean bill of health? 13 A. I think that's what I thought and I think that's what 14 Second Sight were telling us. 15 Q. You say in the email: 16 "Definitely good to keep control of that process." 17 What do you mean by "control of that process"? 18 A. So this -- again, I cannot remember exactly what I meant 19 when I wrote that 12 years ago. If I tell you what 20 I think I meant, it was less about that process and more 21 about how Alice and I were trying to manage Paula. 22 Paula was new in position. Paula was the Managing 23 Director who had effectively presided over the very 24 sharp deterioration in profitability, so she was the MD 25 of POL in RMG Group, and we needed to turn the business 30 1 around in all sorts of ways: in revenue, in profit, in 2 cost control, in everything. 3 So Alice and I thought that the CEO and CFO that we 4 had, Paula and Chris, were okay but, actually, Post 5 Office, in the mess that it was, needed somebody that 6 was great. So pretty much every email I wrote to Paula 7 at that stage was encouraging her to grip things, get 8 traction, keep control, make progress. So that isn't 9 an unusual statement. It's basically saying, "You are 10 the CEO, yeah, get control, drive things, manage things, 11 lead things, get traction, make progress". 12 Q. Well, the process here that's being referred to isn't 13 anything to do with profitability, is it? 14 A. No, it's not. 15 Q. It's nothing to do with the matters that you referred to 16 about the dip in profitability. This is to do with the 17 process of the review of cases by Second Sight? 18 A. Sure. 19 Q. In fact, is what you were doing here encouraging 20 Ms Vennells to take control of the process to gain 21 a favourable outcome for the Post Office? 22 A. Absolutely not. So Alice and I are encouraging Second 23 Sight. We want Second Sight. I think Lord Arbuthnot 24 and the MPs had been trying to get traction with Royal 25 Mail Group for some time. Alice is there going "Yeah, 31 1 I'm listening to you. Yeah, I believe you, I want to 2 find something, so we will appoint somebody". I am 3 there absolutely supporting the appointment of somebody 4 and actually in my mind going, "Should it be Second 5 Sight or should it be somebody better". So in no way 6 shape or form were we not trying to find things. We 7 were trying to find things. We were trying to 8 understand and to fix things. 9 However, in any process, be it about profit or cost 10 or -- it's just leadership of the business. So I want 11 the CEO to lead properly and that means taking control 12 of things. 13 Q. Let's jump forward to when the Interim Report is about 14 to be announced. Can we have POL00021515, please. That 15 is a Board meeting on 1 July 2013. You're in 16 attendance -- sorry, you're present. If we can scroll 17 down, please, we see it's about Horizon and Paula 18 Vennells is giving an update on the Horizon review. Do 19 you have any, now, positive recollection of this 20 meeting? 21 A. So from the minutes is my only recollection of it. 22 I think actually it wasn't a meeting about Horizon. 23 I think it was a meeting regarding network subsidy onto 24 which Horizon was tacked on at short notice with no 25 warning. 32 1 Q. It says: 2 "... gave an update on the Horizon review which was 3 being undertaken by Second Sight and their Interim 4 Report which was due to be presented at a meeting of MPs 5 on 8 July. The investigation to date has found no 6 systemic issues with the Horizon computer system but had 7 highlighted areas for improvement in support areas such 8 as training." 9 What did you understand "systemic issues" to mean? 10 A. I think I believed systemic issues to refer to the code, 11 the software. So was there a problem with the software, 12 which would be a flaw in Horizon? 13 Q. Were you told how many cases that Second Sight had 14 looked at, at this stage? 15 A. At this stage, I don't think I was told. My 16 understanding will have been that they had 47 cases that 17 were in their remit. But I don't think, on this call, 18 there was a conversation about cases. 19 Q. It goes on to say: 20 "The CEO explained that the Horizon, like any large 21 computer system, would occasionally have anomalies, and 22 two were known of over recent years. The Business had 23 dealt with these anomalies to ensure no subpostmaster 24 was out of pocket and these anomalies had not affected 25 any of the cases which Second Sight had reviewed." 33 1 What did you understand or take from the word 2 "anomaly"? 3 A. Again, memory vague but I think that I will have taken 4 that as being -- I guess, in my mind, I will have 5 likened it again to an iPhone release. If there is 6 an iPhone release and then some part of that doesn't 7 link with some other part of the system, then that's 8 a problem, a flaw. So I think a flaw. 9 Q. Were you told anything about when the anomalies were 10 discovered? 11 A. I cannot recall if that was conversed on this call. So 12 again, just to stress, this phone call, I believe it was 13 a Board phone call. 14 Q. Yes, we don't need to go to it but it says at the top 15 "Held by conference call". 16 A. Yes, and it was about a totally different issue. So 17 Horizon was just dumped on us in this phone call at 18 short notice. So no papers and squidged on as an extra 19 little piece. So my memory is that it was a very short 20 update about Horizon on this call because the majority 21 of it was about, I think, network subsidy. I might be 22 wrong on that. 23 Q. If we turn over the page, please, it says: 24 "The CEO was concerned that the report from the 25 independent forensic accountants was not as factual as 34 1 expected and could lead to loose language at the MP 2 meeting. 3 "The Board asked the Business to challenge Second 4 Sight to ensure changes were made to the report where 5 possible and asked the Business to prepare their 6 communication to combat any inaccuracies." 7 Do you recall if any examples were given of the type 8 of inaccuracy that the CEO was referring to? 9 A. I do not recall that, I would doubt if that was the 10 case. So again, I'm sure that there were no written 11 papers for this. This is Paula doing a short, verbal 12 briefing over a phone call. 13 Q. What was your view on that the way it was presented to 14 the Board at this time, on what is clearly a significant 15 issue? 16 A. I was upset. So I was upset that we were being told 17 a week before the report was going to come out that the 18 report was going to come out. So I would have wanted to 19 understand. We had -- the Board had asked several 20 times, many times over the year, "How are Second Sight 21 getting on?" So to have it dropped on us not in 22 a proper, written communication, not at a proper Board 23 meeting with proper papers, but just to have it thrown 24 in as an AOB to say, "Actually Second Sight Report is 25 coming out next week, and we're not happy with it 35 1 because it's inaccurate and, by the way, there are these 2 bugs/flaws", I wasn't happy with that and I don't think 3 the rest of the NEDs were happy with that. It's not 4 a good way to run the business of the Board. 5 Q. Did you discuss with Alice Perkins or -- sorry, I'll 6 start again. 7 Did you discuss with Alice Perkins your concerns as 8 to how it was handled at this point? 9 A. I cannot remember if, on that phone call, I had that 10 conversation. I am sure that -- the NEDs spoke a lot 11 with each other, so I am sure that I and others did talk 12 to Alice and talk to each other to say that we were 13 unhappy with this process. 14 Q. Can we look, please, at the Interim Report, when it came 15 out. It's POL00130412. I think your evidence is that 16 you think you read this at some point between 8 July and 17 16 July; is that correct? 18 A. Correct. 19 Q. If you turn to page 5, please, and go a bit further down 20 to the bottom. Thank you. It says: 21 "Did defects in Horizon cause some of the losses for 22 which [subpostmasters] or their staff were blamed?" 23 Paragraph 6.4: 24 "In the cause of our extensive discussions with 25 [Post Office] over the last 12 months, [Post Office] has 36 1 disclosed to Second Sight that, in 2011 and 2012, it had 2 discovered 'defects' in Horizon Online that had impacted 3 76 branches." 4 Then, over the page, we see at 6.5 and 6.6 there are 5 references to the number of branches affected and the 6 quantum of the shortfalls and surpluses. 7 At 6.7 it says: 8 "[Post Office] was unaware of this second defect 9 until, a year after its first occurrence in 2011, it 10 reoccurred and an unexplained shortfall was reported by 11 [a subpostmaster]." 12 Now, what were your views when you saw this 13 information as to two defects that had caused shortfalls 14 and gains in branch accounts? 15 A. Again, I'll tell you what I think I remembered but my 16 memory is inevitably a little bit vague -- more than 17 10 years ago. I was not as worried as, with hindsight, 18 I should have been when I read this. So we had been 19 told by Paula that these anomalies/bugs were not in any 20 way linked with the cases that Second Sight were 21 reviewing. Second Sight themselves -- if you go to the 22 conclusion of this paper, Second Sight say there are no 23 systemic problems with Horizon, and then they -- in 24 fact, is it possible to scroll down to the conclusion 25 here? 37 1 Q. Yes. It's page -- I think it's page 8. 2 A. So: 3 "We have so far found no evidence of system-wide 4 (systemic) problems [that's the same] with the Horizon 5 software. 6 "We are aware of 2 incidents where defects or 'bugs' 7 in the Horizon software gave rise to 76 branches ... 8 which took some time to identify and correct." 9 So I am reading that but it's not actually raising 10 a huge red flag to me. So it is saying that there are 11 bugs but it's also saying to me that -- but it is -- 12 it's underneath the main point, which is there are no 13 systemic problems with Horizon. 14 So I'm getting the impression from this -- wrongly, 15 with hindsight, but I'm getting the impression that "We 16 have found the bugs, okay, one of them took time", they 17 are not related to the 47 cases that Second Sight are 18 reviewing and, in their report, they also say, "Every 19 system has bugs, it's inevitable". So it was probably 20 an amber flag but it wasn't a red flag to me. 21 Q. You had been dealing or were aware of -- I should say 22 aware of -- challenges to the integrity of Horizon since 23 at least 12 January 2012; do you agree? 24 A. Yes. 25 Q. As you say in your statement, you say you've been 38 1 assured by various members of the business that data 2 integrity wasn't an issue, you agree? 3 A. Yes. 4 Q. Did it not concern you that, during that time, members 5 of the Executive hadn't raised the fact that there were 6 two bugs that affected 76 branches in circumstances 7 where there were allegations of a lack of integrity in 8 the system? 9 A. Yes, it did. So just to be clear on that answer, so 10 I was not overly worried about the bugs. With, 11 hindsight, I should have been more worried but the way 12 this was written and the way that it had been explained 13 to us by Paula, on the 1st and subsequently, it did not 14 make me overly worried. What did make me worried is 15 that we were only finding out about it at this stage. 16 So I thought that the way that it was being communicated 17 to the Board was poor. The way it was launched on the 18 Board on that 1 July phone call was, I think, was 19 unacceptable and I wanted to -- I wanted us to have 20 a different relationship with the Board, so that we were 21 told -- I wanted information to come to the Board freely 22 and quickly, and clearly it wasn't. 23 So the way it was communicated did worry me. The 24 actual fact that we had two bugs did not worry me as 25 much as it should have. 39 1 Q. Was it not beyond that and do you think it should have 2 caused you to be more questioning or distrustful of the 3 information that was being provided to you by your 4 Executive? 5 A. So Second Sight are not saying that this is a big 6 problem. I'm reading the Second Sight Report and the 7 thing that I'm getting from Second Sight Report is that 8 there are no systemic, system-wide issues with Horizon 9 but there are significant issues with training, support, 10 call centre, et cetera, and that was the main message 11 that I got from Second Sight. It wasn't bugs are the 12 issue. What I read Second Sight and understood was the 13 issue is around not the code, not the software, but the 14 support package around Horizon, which was inadequate and 15 needed to be fixed. 16 And I believed that. I mean, intuitively, that is 17 also what I believed. As I had gone around to post 18 offices, lots of subpostmasters would say "It's not easy 19 to use, it's clunky, it's not intuitive, your helpline 20 isn't helpful". So as I read Second Sight's Report, it 21 resonated with me and I thought "Yeah, okay, I agree", 22 and I agreed with their broadening definition of the 23 Horizon system. So they were at pains to point out 24 that, in their view, Horizon wasn't just about the code, 25 the software, which I thought, yes, I agree. The 40 1 horizon system should be a wider thing. It's about the 2 user experience. 3 So as I read the Second Sight Report, which, you 4 know, this document is about, my takeaway wasn't "We 5 have had two bugs that have been found and weren't 6 responsible for the subpostmaster losses", my takeaway 7 from it was that the Horizon system, our old definition 8 has been overly narrow, we need to broaden that 9 definition and we need to fix those things. 10 MR STEVENS: Sir, that's probably a good time to take our 11 first break, as we are moving on to a different topic. 12 I know it's slightly early -- 13 SIR WYN WILLIAMS: No, that's fine, Mr Stevens. What time 14 shall we resume? 15 MR STEVENS: 11.05, please, sir. 16 SIR WYN WILLIAMS: Fine. 17 MR STEVENS: Thank you. 18 (10.54 am) 19 (A short break) 20 (11.06 am) 21 MR STEVENS: Good morning, sir. Can you still see and hear 22 us? 23 SIR WYN WILLIAMS: Yes, thank you. 24 MR STEVENS: I'll carry on. 25 Mr McCausland, we were looking at assurance and we 41 1 got up to the Interim Report. I now want to look at the 2 assurance after that, so we'll take the chronology 3 a little bit out of order but stay on this same theme. 4 I'm going to jump to March 2014, so at this point, for 5 context, the Mediation Scheme is in full swing. Post 6 Office Limited are conducting investigations into that 7 and there's the query of compensation. We then have the 8 Linklaters advice in March, and I want to explore that 9 and what came afterwards. 10 Can we look, please, at your statement, page 62, 11 paragraph 166. So 166, you're talking after the 12 Linklaters advice itself but what you say is: 13 "The Linklaters advice appeared to share the Board's 14 view that Second Sight's Interim Report did not 15 adequately address this ..." 16 There you're referring to getting to the bottom of 17 whether there was any evidence to suggest that Horizon 18 was not working as it should be: 19 "... particularly where any weaknesses or points of 20 malfunction had been identified." 21 So, in terms of your thinking, following the Interim 22 Report, is your position that the Interim Report hadn't 23 disclosed anything -- I think earlier you said it might 24 have been an orange flag, nothing particularly 25 concerning, in terms of bugs, but it hadn't given you 42 1 assurance over whether there were, in fact, weaknesses 2 or points of malfunction in the system. 3 A. So, personally, I actually felt, after the Second Sight 4 Interim Report, I was pleased with it. I thought that 5 we had found what the problem was. So there were -- as 6 we went into the Mediation Scheme and 150 people came 7 into the Mediation Scheme, I thought to myself, "Okay, 8 that's good". I mean, Second Sight have identified that 9 there is a problem with Horizon system, not the code, 10 but the wider system, and 150 people have come into the 11 Mediation Scheme to say, "We have been affected by this, 12 training, ATMs, support, helpline", whatever, and 13 therefore I was actually feeling quite good that we had 14 identified what the issue was. 15 Q. Pausing there, you were presumably aware that people 16 coming into the scheme included people alleging that the 17 system had flaws? 18 A. Yes, alleging that, yes. 19 Q. Just taking what you say at 166 at -- 20 A. Sorry. So I wasn't -- all of the cases were individual 21 and were confidential, so I wasn't aware of the 22 individual cases, but my feeling was that the -- and, as 23 we went through this, again, we were getting reports. 24 So, before we got to the March '14 date that you're 25 talking about, the Board would have had an update, 43 1 probably a couple of months before that saying, "We have 2 now investigated 74 [I think it was] of the cases and 3 not found anything in Horizon", but they are about the 4 wider issue, so I wasn't aware of the individual 5 specifics -- 6 Q. If I could just be clear here what you're saying. 7 You're not aware of the specifics but between the start 8 of the Mediation Scheme and to March 2014, were you 9 aware, as a matter of generality, that some of the 10 applicants to the Mediation Scheme were alleging that 11 discrepancies had been caused by problems in the Horizon 12 IT system? 13 A. Inevitably, yes. But my understanding of that is the 14 broader IT system. So I'm not -- I wasn't aware of any 15 of the specifics and my understanding was that, as we 16 were going through, we had a team of 20 people, yeah, 17 trying to work their way through the individual case 18 reports, and the message that we were getting back was 19 that, as they were being worked through, it was 20 consistent with the Second Sight Interim Report, ie that 21 we could explain those things. Nowhere in those, 22 I think, 74 reports was there an indication that there 23 was a software or a bug problem. 24 Q. When you were referring to the 74 reports were you 25 referring to the investigations conducted by Post Office 44 1 Limited? 2 A. Yes. 3 Q. I think it's simplest just to go to the advice at this 4 point. If we go to POL00107317, please. So this is the 5 Linklaters Advice, 20 March 2014. Now, before moving on 6 to the substance, can we just turn to page 2, please, 7 and paragraph 1.4. It says: 8 "Absent such proof that Horizon is not working as it 9 should, the Post Office should be able to recover losses 10 which the Horizon records indicate are owing on 11 an individual SPMR's account. If the Post Office is 12 entitled to recover losses, then there can be no 13 question of a consequential loss claim on the part of 14 the [subpostmaster] relating to their recovery ..." 15 Alwen Lyons gave evidence to the Inquiry on 21 May 16 2024, to the effect that she thought you would have 17 thought this paragraph was good because the Post Office 18 could put a lid back on the can of worms and pay very 19 little. Does that fairly summarise what your views were 20 of the Mediation Scheme at this point? 21 A. Absolutely not. So I think Alwen was -- Alwen's words 22 were basically that I was the pragmatic one on the 23 Board, and I think -- 24 Q. Sorry, when you say Alwen's words, when are you 25 referring -- 45 1 A. You just quoted Alwen's evidence -- 2 Q. Yes. 3 A. -- and Alwen's evidence was -- she wasn't saying that's 4 what I had said; she was saying that was her view of 5 what I might have been thinking but she was doing that 6 on the basis that I was the pragmatic person on the 7 Board. I think, actually, exactly around that time, you 8 have already disclosed to me an email from me to Paula, 9 where I was the one actually suggesting that we should 10 pay significant amounts of goodwill compensation. So 11 I said to -- I put an email to Paula in advance of 12 a Board discussion that says, "This is growing, and the 13 potential bill to the Post Office is huge. We are at 14 the moment saying that we are not going to pay 15 consequential or goodwill payments of any scale but, 16 actually, why don't we? Why don't we just say that the 17 worst cases get 75K, medium 50K, 25K, doesn't matter how 18 you do it" -- I think in the Board meeting I actually 19 doubled those figures -- "if you did that and paid 20 a significant amount of compensation, then you might 21 actually get out of this". 22 So Alwen, I think, is right in saying that I was the 23 pragmatic one, but I'm not the one -- this isn't 24 EBITDAS. So this is not sustainable profit. This is 25 an exceptional cost. The Post Office has got 46 1 1.5 billion that it's tying to go through. If you spend 2 15 million, which was my suggestion, as goodwill 3 payments, it's chicken feed. It's not an existential 4 crisis. So I'm actually the one -- I think I was the 5 only one -- who was saying "We should pay something if 6 it will solve it". 7 Q. So you disagree with the point I just put to you? 8 A. Yes. 9 Q. We'll just move on. 10 We could turn, please, to page 3 paragraph 2.3: 11 "Importantly, Jo Swinson, Parliamentary 12 Under-Secretary of State for Employment Relations and 13 Consumer Affairs, noted that there was no evidence of 14 a systemic problem with Horizon. This has also been the 15 Post Office's conclusion on the information so far 16 available to it. We note that there is, so far as we 17 understand it, no objective report which describes and 18 addresses the use and reliability of Horizon. We do 19 think that such a report would be helpful, though there 20 is a decision to be made about how broad and/or thorough 21 it needs to be." 22 So, at this point, you've referred to past sources 23 of assurance you'd had but you have Linklaters now 24 saying there is no objective report which describes and 25 addresses the use and reliability of Horizon; was that 47 1 a surprise to you? 2 A. So when we were having the original Second Sight -- "Are 3 Second Sight the right people" discussion, at that stage 4 there was a discussion about could you actually -- can 5 you do a system review? Does the code exist? Is it 6 possible to do that? I think, you know, Second Sight 7 had said to us that actually it would be a very 8 difficult, almost impossible, thing to do and, when we 9 subsequently had Deloitte do it they also said, broadly, 10 the same thing. So a proper code-based review was 11 almost impossible and, therefore, I don't think it was 12 a total surprise -- 13 Q. Just pausing there, it doesn't say that there needs to 14 be a code-based review, does it? It says that there 15 isn't an objective bespoke report that describes and 16 addresses the use and reliability of Horizon. Did you 17 think that there was such a report, an objective report, 18 describing and addressing the use and reliability of 19 Horizon before then? 20 A. Probably not. I don't think it was a surprise, no. 21 Q. So did that strike you as troubling, given it's a few 22 years down the line of dealing with these claims and 23 there's no such report available to the Post Office? 24 A. Well, the whole point of appointing Second Sight was to 25 find the issues and find flaws. So if you go back to 48 1 Second Sight's remit, they were there to actually go 2 through the cases and find a flaw in Horizon, and their 3 advice was, and we believed it, we agreed, that that was 4 the best way to do it. And Second Sight were doing 5 a number of reports about the reliability of Horizon. 6 So Second Sight were, right then, working on 7 an Interim Report -- so it wasn't a -- they called it 8 a Part One report, I think -- which did describe Horizon 9 and the way it was being worked. So my understanding 10 was that that was what we were using Second Sight to do. 11 Q. Let's look onwards please, page 9, paragraph 5.30. It 12 says: 13 "It is the reliability of the Horizon system as 14 a matter of principle which important. If there are 15 doubts about the reliability of the system then this 16 could obviously impact on the Post Office's ability to 17 claim losses since it calls into question whether such 18 losses exist at all. This is the fundamental question 19 and one which has not yet been satisfactorily addressed. 20 "Second Sight have not done what we would have 21 expected them to in terms of an investigation into 22 Horizon. The logical and obvious start for their work 23 would have been a thorough review and description of how 24 Horizon is supposed to work, its day-to-day use by the 25 [subpostmasters] and an in principle identification of 49 1 any weaknesses and likely points of malfunction." 2 Pausing there, what Second Sight had been asked to 3 do was look at individual cases, I think, to use your 4 words, trace the money; is that right? 5 A. Originally but then that morphed. So then the -- now, 6 at this stage, Second Sight were doing their Part One 7 and Part Two thematic reviews, which were, to some 8 extent, explaining how Horizon worked and where the 9 points of weakness were. 10 Q. Pausing there, by this stage, the reports, you hadn't 11 seen them or they hadn't been released? 12 A. Correct, yeah, we knew they were working on them but 13 they were taking a long time because Second Sight were 14 trying to do a lot of things at the same time. 15 Q. We see at paragraph 5.32 it refers to Second Sight being 16 due to produce the generic report in due course. 17 A. Yeah. 18 Q. At this point, having read this, did you think it was 19 important to follow Linklaters' advice and get 20 an objective report that looked at the use and 21 reliability of the Horizon IT system? 22 A. Yes, I did. 23 Q. That's why, presumably, Deloitte were subsequently 24 commissioned? 25 A. Yes. 50 1 Q. Can we look at the Board meeting where that was 2 discussed, please. It's POL00021523. 3 A. Sorry, can I make one comment about the Linklaters 4 report? 5 Q. Yes. 6 A. So it does also say in the Linklaters report that, even 7 absent such a report that Deloitte then turned out to 8 be, Post Office still had good reasons to believe that 9 the losses -- that they should not be paying 10 consequential losses, due to the level of assurances 11 that existed, such as ISAE 3402, such as Fujitsu, such 12 as Gareth Jenkins and Anne Chambers. So they don't say 13 "Huge red flag you shouldn't be doing this"; they say, 14 "Actually, you've got a lot of good evidence but, in 15 addition, it would be really helpful to have Deloitte", 16 and I absolutely agreed with that. 17 Q. We've got the Board minute here it's 26 March 2014. 18 You're present and we also see in attendance, five down, 19 Christa Band from Linklaters. If we go to page 2, 20 please, we don't need to go through it but Ms Band makes 21 various criticisms of the Second Sight work. 22 At (f) we see that, at that point: 23 "The Board thanked Christa for her report ... 24 Christa Band left the meeting." 25 So, presumably, in terms of reading these minutes, 51 1 just to confirm, everything from (f) down is without 2 Christa Band being present? 3 A. I assume so. 4 Q. We go to (k), it says: 5 "The Board agreed that they needed to commission 6 a piece of work, to complement that undertaken by 7 Linklaters, to give them and those concerned outside the 8 Business, comfort about the Horizon system." 9 Why did the Board wish to obtain a piece of work to 10 give it comfort about the Horizon IT system? 11 A. I think we -- so, back in February, there had been 12 a very large difference in the potential bill that the 13 Post Office would be paying, ranging from 6 million to 14 100 million and we, internally, on the Board had had 15 some discussions. I was suggesting significant goodwill 16 payments. Others were saying no, the Linklaters work 17 basically said that the key determinant of that was 18 going to be how robust we were with our belief that 19 Horizon was not malfunctioning and, therefore, in the 20 absence of Second Sight's work that they were still 21 doing, it was going to be very sensible for us to 22 actually have another piece of work. 23 Q. So is that another piece of work to shore up the Board's 24 position or an objective review to understand whether or 25 not Horizon's data integrity is satisfactory? 52 1 A. I mean, the Board didn't really have a position. The 2 Board just wanted to get to the truth. 3 Q. Well, if the Board wanted to get to the truth, would it 4 not say at (k) "The Board decided to commission a piece 5 of work which would be an objective investigation into 6 the Horizon IT system and its integrity", rather than 7 saying that it wanted "comfort about the Horizon IT 8 system"? 9 A. So that's a fine point of wording and Alwen wrote the 10 words but I can tell you that the people on the Board, 11 the NEDs on the Board, always just wanted to know the 12 truth. 13 There is absolutely no benefit for a NED in trying 14 to hide the truth. 15 Q. So did that mean, for you, a report that described the 16 Horizon IT system and commented on how it worked in 17 practice? 18 A. Yes, and identified potential flaws. 19 Q. It refers to the terms of reference. The first bullet 20 point says: 21 "The work undertaken by Angela van den Bogerd 22 explaining how the system works." 23 Can you help us with what that's supposed to mean or 24 why Angela van den Bogerd is referred to in respect of 25 these terms of reference? 53 1 A. So after the Interim Report from Second Sight, there 2 were a number of workstreams which came out of that, 3 Working Party, Mediation Scheme, Lessons Learned but, to 4 me, probably one of the most important was the Business 5 Support Programme or the Business Improvement 6 Programme -- it's called both things -- which basically 7 took the Second Sight Interim Report findings and then 8 tried to wash those through the business and fix things 9 which were not correct. So it fixed the training, fixed 10 the cultural issues, fixed the helpline, fixed the way 11 we suspended subpostmasters. It did a lot of things. 12 Q. So the non-IT issues is what that's referring to? 13 A. Yes, so it's not about -- I don't -- some of it, 14 I think, it does touch on IT but it's primarily the -- 15 I say -- the word "cultural" is a bad word but, if you 16 understand what I mean by the cultural issues that are 17 identified in the Second Sight Interim Report, I think 18 that is what it means. And as a -- if you are going to 19 describe the use of Horizon and articulate that in 20 a document, then the work that that Business Support 21 Programme had done, I think, would be very useful as 22 a starter for ten in that. So that's as I understand 23 that. 24 Q. So that's the Business Support Programme. We've then 25 got two bullet points on data integrity issues. The 54 1 final is: 2 "A response to the most significant thematic issues 3 raised by Second Sight." 4 Why did an objective report or investigation need to 5 include a response to the thematic issues raised by 6 Second Sight? 7 A. I don't know, to be honest. I don't remember reading 8 that or thinking about that last bullet point, and 9 I don't remember any discussion about that last bullet 10 point. 11 Q. Just so we're clear, when you say you don't recall it, 12 are you suggesting in any way that this might be 13 inaccurate in terms of what was discussed or not? 14 A. No, no. I'm simply saying that I do not remember any 15 conversation that the -- at that meeting, after 16 Linklaters had gone, which was, "Yeah, and we need to 17 have a response to the significant thematic issues". 18 Q. Could we look please at -- 19 A. In a way, it doesn't worry me. If you are getting 20 somebody else to actually do a piece of work, I think it 21 would be sensible for them to see the Second Sight work 22 and to consider that and either to validate or refute 23 those issues. 24 Q. Could we look, please, at POL00148075. 25 This is a Project Sparrow subcommittee meeting. You 55 1 weren't in attendance at this meeting and I understand 2 you didn't attend the subcommittee; is that right? 3 A. Correct. 4 Q. In your statement, page 46, paragraph 125, you refer to 5 these minutes going to the Board. Would you have read 6 them? 7 A. Yes. 8 Q. If we look, please, at page 4 and go down to the "Update 9 on Horizon Online HNG-X ('Horizon') Assurance Work", at 10 point (b) it refers to two parts. I'm not going to read 11 it out because it's known well to the Inquiry but, 12 effectively, Part 1 is a desktop-based review, and it 13 says, you see at the end: 14 "The assessment [of Part 1] will not consider the 15 integrity of the Horizon processing environment at 16 implementation. That would form Part 2 of the work." 17 It then goes on to say: 18 "Although no system could be absolutely 19 'bulletproof', no issues had yet been identified through 20 the cases being investigated or any other route that has 21 called into question the integrity of Horizon. Nor have 22 any widespread systemic faults been identified since 23 Horizon Online was implemented. These two points, along 24 with the Part 1 work (depending on the results) should 25 be sufficient to assure Post Office that Horizon is fit 56 1 for purpose." 2 Firstly, can you recall reading this document when 3 you received it? 4 A. I cannot recall reading it but I'm sure that I did read 5 it. The minutes of the subcommittees would have been in 6 the Board pack and I would have read the whole Board 7 pack. 8 Q. Did you discuss this approach to the Deloitte work with 9 any of the Non-Executive Directors? 10 A. I cannot remember discussing that. I think it is 11 unlikely that I did. The way that the subcommittee 12 minutes worked was generally they were in the Board pack 13 and the chairman of the subcommittee would generally 14 give a very short -- of the relevant subcommittee -- 15 would give a very short description of what happened and 16 take questions. But there was rarely a substantive 17 discussion regarding the minutes of the subcommittees, 18 of which there were many subcommittees. So I doubt that 19 there was a substantive discussion about that. 20 Q. Did you see any problem at the time with the plan not to 21 commence or go forward with the Part 2 work? 22 A. No. I wasn't in the subcommittee. So I mean -- can 23 I just explain the way subcommittees work? 24 Q. Well, we've -- 25 A. You know that? 57 1 Q. We have that, how they work. But you would have read 2 this, yes? 3 A. I would have read it but -- 4 Q. You are there as a Senior Independent Director to assist 5 the Post Office with strategy, yes? 6 A. Yeah. 7 Q. Part of that strategy is how the Post Office was to 8 respond to claims about the integrity of the Horizon IT 9 system, yes? 10 A. Yes. 11 Q. That was important, not just for the applicants in the 12 scheme but for how the data that Post Office relied on 13 to produce its account was prepared? 14 A. Yes. 15 Q. So when you have a suggestion from Linklaters that, 16 firstly, there's no objective review into the integrity 17 of the Horizon system, (2) that it would be a good idea 18 to get one and the Board has suggested getting one, why 19 did you not see the problem with stopping at a desktop 20 review? 21 A. I don't think it said "stopping". It said that it was 22 going to be a two-part exercise. It's quite sensible. 23 So -- it's quite sensible to break an exercise down into 24 two parts. The first part being Part 1, and see where 25 you get to at Part 1, and then take a view about Part 2. 58 1 We already know that it is -- we've already had 2 conversations that Part 2 is going to be potentially 3 difficult because the data may not exist, its very old, 4 it's very disparate, and therefore Part 2 may not be 5 possible and, if it is possible, it may be very 6 difficult. So to have it in a bitesized chunk feels 7 sensible now, it felt sensible at the time. 8 Q. So, in your view at this point, Part 2 hadn't been 9 written off, it was an open question to be assessed 10 after Part 1? 11 A. Absolutely, yeah, and I think that it says it very 12 clearly that the SSC have a task, which I think is in 13 the minutes here, in the action points, that the SSC 14 have a task to get the CIO to come along and talk about 15 when and how and if -- are we going to do Part 2. So 16 Part 2 is absolutely there as a scope but the scope has 17 been split into two parts. 18 Q. I think I should just clarify one thing. When you say 19 "SSC", I assume you're referring to Sparrow 20 Subcommittee? 21 A. Yes. 22 Q. There's another SSC in this Inquiry, that's why I just 23 wanted to double check that. 24 A. Apologies. 25 Q. No, you don't need to apologise. Let's move on in the 59 1 chronology, POL00021524, please. It's a Board meeting 2 on 30 April 2014. You're present and, if we can scroll 3 down, we see at the bottom Gareth James of Deloitte is 4 also in attendance. 5 Can we turn, please, to page 6. If we go down, 6 please, so subparagraph (d), it says: 7 "Gareth James reported that all the work to date 8 showed that the system that strong areas of control and 9 that its testing and implementation were in line with 10 best practice. Work was still needed to assure the 11 controls and access at the Finance Service Centre." 12 Now, I think in your statement -- but do correct me 13 if I'm wrong -- you criticise that this oral briefing on 14 the work to date was incomplete or inaccurate? 15 A. Can I just ask, where are you taking that from? 16 Q. Yes. If we could bring up the witness statement on the 17 screen at the same time, and page 75. If we could go to 18 the bottom, please, paragraph 200: 19 "I do not think that the Board received the full 20 Deloitte Project Zebra Report. I do not know if the 21 Sparrow subcommittee saw it." 22 You then say: 23 "The Board was given a somewhat misleading verbal 24 briefing and an incomplete Board Summary, neither of 25 which clearly exposed the serious problems that Deloitte 60 1 found." 2 Now, the incomplete Board Summary is a reference, 3 I'm sure, to 4 June. 4 A. Yes. 5 Q. We're going to come to that in an email from Chris 6 Aujard and Rodric Williams. When you say "somewhat 7 misleading verbal briefing", is that referring to -- 8 A. Yes. 9 Q. -- the 30 April Board meeting? 10 A. Yes. 11 Q. Okay. So if we could bring that Board meeting back, 12 please. It's POL00021524, page 6, please. Just back 13 down to (d), please. So (d) is the paragraph I read out 14 before. Now, do you have any independent recollection 15 as to what was said at this meeting or are you reliant 16 on the minute? 17 A. I do not have any recollection of the meeting itself. 18 I am reliant on the minutes. But I -- so I probably 19 would have remembered it, had I come out of the meeting 20 with a big worry, and I do not remember coming out of 21 that session with a big worry and, therefore, I think 22 that I listened to Gareth James. He had the day before 23 given a small document but, basically, I came out of 24 that session thinking "Yeah, we're in pretty good 25 shape". 61 1 Q. So Alice Perkins gave evidence to the Inquiry saying 2 that she thought the Board had the impression that 3 Deloitte were going to able to write a report giving, if 4 you like, Horizon a clean bill of health; would you 5 effectively agree with that? 6 A. Yes. 7 Q. "Work was still needed to assure the controls and access 8 at the Finance Service Centre." 9 You accept, presumably, at this point, that it was 10 an interim report, effectively? 11 A. Absolutely. 12 Q. If we look down -- we may as well cover it while we're 13 here -- it says: 14 "Chris Aujard explained that several subpostmasters 15 who were challenging Horizon had made allegations about 16 'phantom' transactions which were non-traceable. 17 Assurance from Deloitte about the integrity of the 18 system records would be very valuable." 19 That's presumably referring to the remote access 20 issue, is it? 21 A. It is and, actually, "phantom transactions" was probably 22 a phrase that was used more than "remote access" but, 23 yes, it means the same thing. 24 Q. So, by this point at least, you were aware of the 25 allegations about remote access? 62 1 A. And specifically asking Deloitte in their investigation 2 to try to understand is there validity in that. 3 Q. So it was an important matter, you thought? 4 A. Correct. 5 Q. Then at (f) we see: 6 "The Board asked what assurance could be given 7 pre-2010 when the different Horizon system was in use." 8 It said Gareth James would go on to cost that up, 9 effectively. 10 Why was the Board concerned to look pre-2010 as 11 well? 12 A. So the vast majority of the prosecutions took place 13 before 2010, under Royal Mail Group, under old Horizon. 14 We understood that it was going to be difficult to get 15 assurance because of the age and just -- mainly because 16 of the age but, if there was an opportunity to get 17 assurance on old Horizon as well as on online Horizon, 18 then that would be helpful and useful. 19 Q. So you specifically mention there that, in the Board 20 processes of thinking when -- asking for the pre-2010 21 work, it was considering how that might affect past 22 prosecutions? 23 A. I'm not sure that it was yes, implicitly. We just 24 wanted -- at that stage, we weren't really thinking so 25 much about the prosecutions; we were thinking about the 63 1 integrity of Horizon. So the linkage to past 2 prosecutions wasn't high in the mind. It was -- so 3 Deloitte were looking at what is the integrity of 4 Horizon Online like? We also would like to understand, 5 if we could, what was the Horizon -- the old Horizon 6 integrity like? 7 Q. But it was in the background and so, presumably, made 8 this work all the more important? 9 A. Yes. 10 Q. Could we look, please, at POL00304159. If we could go 11 down, please, to Larissa Wilson's email. We see it's 12 from Larissa Wilson, you are in the distribution list, 13 29 April 2014, so it's the day before the meeting we've 14 just been to: 15 "Please find attached the draft report for item 6 16 attached. This paper will also be available on BoardPad 17 and hard possibly will also be provided at tomorrow's 18 meeting." 19 Could we then look at the attachment to that, which 20 is POL00304160. I appreciate you've been given this 21 document we're going to now this morning. 22 So we see it's a Deloitte report, "Review of 23 Assurance Sources, Executive Summary". I think behind 24 "Draft", it will say, "Emerging findings at 29 April 25 2014". Do you remember having read this report or do 64 1 you remember receiving it? 2 A. I don't remember receiving it, although I don't doubt 3 that I did. 4 Q. If we turn the page, please, to page 2. I should make 5 it clear you didn't have this report when you drafted 6 your witness statement. You refer to a separate report 7 around this point -- 8 A. (The witness nodded) 9 Q. -- so that's why I'm taking you to it now. 10 Under "Overall comments" -- I'm not sure why the 11 "DRAFT" is appearing in front on this is screen but 12 there we are. It says: 13 "A significant amount of work has been performed 14 ..." 15 In fact, it may, sir, be better to come back to this 16 at a later stage. Actually, we don't need that part. 17 We can go and look at the bottom paragraph. 18 It refers to: 19 "Our main recommendation for improvement in the 20 assurance provision therefore would be for [Post Office] 21 to extend the formal risk and control framework, already 22 in place for general controls, to also embrace key risks 23 and controls holistically across the [Horizon Online] 24 processing environment. For example, to include 25 controls in specific risk and thus more operational 65 1 areas of the business, such as the Finance Service 2 Centre." 3 So similar as to the minutes we just went to, yes? 4 A. Yes. 5 Q. If we go back, slightly up, please, we see under 6 "Overall comments" it does say in the first paragraph: 7 "This work is comparable to that typically see [it 8 will say] in other, similar organisations." 9 So you may not be able to recall reading it but, if 10 you had read this at the time, is that consistent with 11 the feeling you remember of being reassured? 12 A. Yes. I mean, I do not remember reading this at the 13 time. I'm sure I did read this at the time but the 14 combination of reading this and listening to Gareth 15 James the following day at the Board meeting will have 16 not made me feel rosy and warm, and clearly there are 17 things more to do, but not made me feel overly worried. 18 MR STEVENS: Thank you. That can come down. 19 Sir, just so you know, the version on the system has 20 the "DRAFT" behind the text, so when you come to read it 21 you won't have the same difficulties. 22 Q. Could we please bring up POL00105635. 23 This is a document to which you refer in your 24 witness statement. If we go down slightly, please, we 25 can see it. It says, "Project Zebra -- Phase 1 Report 66 1 ... Content and Key Extracts; DRAFT -- for validation in 2 advance of Board discussion on Wednesday 30 April". 3 Now, Gareth James will give evidence to this Inquiry in 4 written form that said that this formed the primary 5 basis of discussion for the meeting on 30 April. 6 As you say, you referred to it in your statement, do 7 you have any independent recollection of reviewing it 8 now or not? 9 A. Again, I do not have a recollection of reviewing it but, 10 if it were sent to me for a Board discussion, I will 11 have read it. 12 Q. But, for example, you can't assist with, now, whether 13 this was in the Board room at the time when the 14 discussion was taking place? 15 A. I cannot but my instinct is that it was. 16 Q. Could we look, please, at page 5. This is "Key Matters 17 for Consideration", and you see on the left there's 18 "Risk Area", in the middle the "Matters for 19 Consideration", and on the right the "Nature of Work 20 Done". If we could turn the page, please. We have "(4) 21 "Specific" on the left and, on the right, it says, 22 "Other work only, no assurance work noted". At (d), it 23 says: 24 "Audit Store: This records all transactional 25 activity and certain (key) system events. Work we have 67 1 seen performed on this store has been performed by 2 Fujitsu and is not 'evidence based', as the 3 documentation provides a description of the process they 4 have performed only. It is also not clear from the 5 documentation that we have been provided whether: 6 "[Post Office] has agreed that the current capturing 7 of certain, key system events is complete and 8 appropriate for potential governance and investigation 9 needs; and 10 "Investigatory work on the Audit Store has all been 11 performed by Fujitsu who, whilst technically qualified, 12 do not constitute an independent nor experienced party 13 for risk driven assurance purposes, or what risk 14 analytic tools were used for these purposes." 15 If we go down to the "Key Potential Next Steps", we 16 have 2(b) "Audit Store Testing" for a key potential next 17 step: 18 "An independent party should review and test the 19 Audit Store functionality, as described within the 20 technical documentation provided by Fujitsu. This 21 should include certain data analytical tests or 22 underlying Audit Store data, to better understand, 23 profile and examine the operation of the store, and, 24 potentially use historic characteristics of incidents 25 and errors to analytically search for the 68 1 characteristics and trends within the audit records." 2 Do you recall that being discussed at the meeting, 3 these key potential next steps and points raised about 4 the audit store? 5 A. I do not recall the conversation at that meeting. 6 Q. Can you assist us with what your understanding would 7 have been of these issues, if you can put yourself in 8 the position of reading it at the time; so what would 9 that have told you? 10 A. I think that it's basically saying that a lot more work 11 needs to be done at Fujitsu and to just understand how 12 it works and get some independent -- or get them to 13 review it. So they're basically saying, you know, "We 14 need to look more at the audit store". I think -- 15 Q. Sorry. 16 A. Yeah, I mean, the -- at that meeting -- this is the 17 meeting, isn't it, where we're basically asking Deloitte 18 to widen their scope? So we'd set up part -- the 19 Sparrow Subcommittee had set up the terms of reference 20 for Deloitte, agreed it with Linklaters, agreed it with 21 the Sparrow subcommittee, got Deloitte started, got them 22 started on a Part 1., and then on the 30th, at the Board 23 meeting, that scope was broadened a bit, which included 24 phantom transactions, which undoubtedly would have been 25 in Deloitte -- in Fujitsu and I think this is also 69 1 saying that they should review and test the audit store 2 functionality. 3 Q. Irrespective of whether -- well, you don't remember 4 reading it. Do you recall anyone from the Post Office 5 Executive either briefing you or informing you about 6 these suggestions in this document by Deloitte? 7 A. I don't but, to be honest, I wouldn't really have 8 expected them to, in that the Deloitte work was within 9 the Sparrow Subcommittee and, therefore, had I been on 10 the Sparrow Subcommittee, I might well have, but 11 I wasn't and, therefore, my -- the only notes that I saw 12 at the time and the only notes that the Inquiry have 13 given me, are the minutes of the Sparrow Subcommittee. 14 And, as we talked about before, in the reading of the 15 papers which would have gone to the Sparrow Subcommittee 16 and the hours that they spent to condense that down to 17 a few pages of minutes, inevitably means that I am far 18 less sighted on that than people who are on the Sparrow 19 Subcommittee. 20 Q. In your statement, you refer to this Phase 1 report and 21 you say: 22 "It did not raise any particular red flags with me, 23 albeit I knew controls around the system needed 24 improving." 25 One thing I want to test is you earlier said in your 70 1 evidence that on 30 April you came away feeling good 2 about Horizon or the work that was being done by 3 Deloitte. 4 A. So, I mean, I think I said I didn't feel warm and rosy 5 but I didn't have -- but I didn't have red flags. 6 I didn't feel overly worried. So there was clear -- so 7 I came away feeling -- this is an Interim Report, we 8 have already widened the scope -- 9 Q. Yes, I'm just trying to summarise where you are. 10 A. So I would have felt not warm and rosy but not overly 11 worried. 12 Q. Let me just get to the question. That feeling you've 13 described, do you think you would have had that feeling 14 if these issues had been discussed on 30 April? 15 A. Yes, I don't think that those issues would have changed. 16 So again, I'm not reading that to say, "Oh my God, I'm 17 really worried", I'm reading that as to say more work 18 needs to be done and more investigation is required, 19 particularly in the audit store with Fujitsu. 20 Q. Could we look to the product that was given to you, 21 please. It's POL00029733. We see the email from Alwen 22 Lyons on 4 June, you're in the distribution list. It 23 says: 24 "Please [see] below a message from Chris Aujard and 25 Lesley Sewell ..." 71 1 Sorry, I earlier said Rodric Williams; it was Lesley 2 Sewell who was joint on this. 3 If we could turn the page, please, so we see it 4 talks about the briefing, and it says: 5 "The briefing strives to be succinct and 6 intelligible. However, given the subject matter and 7 scope of the review, it remains somewhat technical. 8 Furthermore, it is based on a desktop review of 9 currently available information ... It is therefore 10 heavily caveated. 11 "In the briefing, Deloitte expressly identify 12 a number of limitations and assumptions which underpin 13 their findings ... The briefing must be read in this 14 context. That said, its key findings are ..." 15 I'm not going to read them out because I understand 16 you've read that summary. 17 A. Yes. 18 Q. Can you just explain what your view was of the Deloitte 19 work or what you took from this summary? 20 A. From the summary or from the -- 21 Q. From the summary. 22 A. From the summary, I took, that -- well, I took this as 23 a good, affirmative report saying that Horizon was in 24 good shape. So I did not feel overly worried when 25 I read the summary. 72 1 Q. Did you acknowledge or understand from the summary what 2 the limitations were; what did you think they were? 3 A. Sorry, so when -- 4 Q. How much weight did you think you could place on this 5 report from the summary, based on the described 6 limitations? 7 A. Let me just be clear. So when I read this email -- so 8 there's an email from Chris and then there is the report 9 from Deloitte. When I read the email from Chris, I felt 10 good, in that the email was basically saying 11 Fujitsu/Horizon is in good shape. When I read the Board 12 summary, which was the condensed version on the full 13 report, I felt less good. It wasn't an easy read and 14 I don't have a vivid memory of this but my memory of it 15 is that I felt less good and I thought that there were 16 some questions which still needed to be answered in that 17 Board summary. 18 Q. What were the questions that you thought still needed to 19 be answered from the Board summary? 20 A. So, again, my memory it's not complete. I'm trying to 21 remember back more than 10 years ago here. But I do 22 remember that, in one of their matters, which, with 23 hindsight, I can tell you is Matter 3, it basically says 24 that they have not found documented controls which, you 25 know, give Horizon the protection that it should have. 73 1 So there were questions around that that definitely 2 needed to be answered. That wasn't how I read the email 3 and so there were two things in my mind: first of all 4 the email is over only positive; and, secondly, the 5 report itself still has some questions to answer. 6 Q. I was going to turn to the report but let's just pick up 7 on that first. Did it concern you that the summary 8 email was positive in comparison to what you took from 9 the report itself? 10 A. Yes, again -- so I'm trying to remember back 10 years. 11 So I have not got a particularly clear memory of it but 12 I do remember feeling a disconnect between the email and 13 the report. 14 Q. Did you do anything about that? 15 A. I cannot remember. I mean, if I felt a disconnect, it's 16 likely that I would have but I cannot remember what 17 I did. 18 Q. Well, let's look at the report, please. It's 19 POL00130618. If we could turn to page 3, now you've 20 clearly read this report, the Inquiry has seen it, so 21 I'm not going to go to it in any detail and try to 22 summarise it. At the start we see that Deloitte say 23 this: 24 "... did not constitute an audit or assurance 25 engagement in accordance with UK or international 74 1 standards." 2 Then, when we go to (3), the "Limitations and 3 Assumptions", the desktop-based exercise: 4 "... significant gaps existing in the information 5 available ..." 6 The last bullet point: 7 "We have not validated or commented on the quality 8 of the documentation supplied to us." 9 Then, over the page, the assumptions includes at the 10 bottom: 11 "Assertions made by [Post Office Limited] and 12 Fujitsu staff have been accepted as accurate without 13 corroboration or verification." 14 So, taking that together, is this a fair summary of 15 the Deloitte work: they reviewed documents on how 16 Horizon worked and assumed they were accurate? 17 A. Yes. 18 Q. Yes? They hadn't tested whether the processes described 19 within the documents had been implemented? 20 A. Yes. 21 Q. Where there were gaps in documents, they may have spoken 22 to Fujitsu and Post Office staff and, where they have 23 spoken to Post Office and Fujitsu staff, they would have 24 accepted what they said as accurate without 25 corroboration or verification? 75 1 A. Yes. 2 Q. That didn't really meet the form of objective 3 independent review that Linklaters were suggesting; 4 would you agree with that? 5 A. Yes. 6 Q. Did you acknowledge that at the time? 7 A. So, at the time, I felt that this was an unsatisfactory 8 piece of work, in that there were lots of limitations, 9 it wasn't a particularly easy or clear read, it was 10 giving us some assurance but there were a lot of areas 11 that still needed to be followed up. 12 Q. Pausing there, when you say it's giving you some 13 assurance, this was doing no more than pulling together 14 and summarising other sources of documentation and 15 pre-existing assurance work; would you agree with that? 16 A. It was desktop exercise using existing documentation 17 but, yeah, we knew that's what Part 1 was going to be. 18 So what they were not going to do was to go through and 19 look at all the code in Horizon. So it was really all 20 that they could do. 21 Q. So this hasn't really given any new or independent 22 assurance to the position before the Linklaters advice; 23 would you agree with that? 24 A. No. I -- 25 Q. If it's a desktop report that is looking at other 76 1 assurance documentation, how does that give you -- 2 A. Because I hadn't seen all the other assurance 3 documentation. So there were definitely things in this 4 report which had not previously been brought to my 5 attention. So I learnt things in reading this. So 6 I accept that the business may have had all of that 7 information but I'm not sure that it had been pulled 8 together, in a way. So if you go back to what 9 Linklaters were saying here, document the -- Linklaters 10 were suggesting that we had somebody actually go through 11 the design of Horizon and its use. So, inevitably, that 12 is going to be using existing documentation. 13 Q. So is this coming back to the original point I put to 14 you earlier, that what was being sought here was 15 a document that collated existing assurance to use in 16 the Mediation Scheme, rather than a true independent 17 investigation itself? 18 A. I don't think this was to use in the Mediation Scheme. 19 I think this was to actually understand for ourselves 20 the integrity of new Horizon, Horizon Online. 21 Q. If we go, please, to page 7, Matter 3: 22 "Baskets of transactions recorded to the Audit Store 23 are complete and 'digitally sealed', to protect their 24 integrity and make it evident if they have been tampered 25 with." 77 1 Then, just scrolling further down, it says: 2 "We have not identified any documented controls 3 designed to: 4 "Prevent a person with authorised privileged access 5 from deleting a digitally sealed group of data and 6 replacing it with a 'fake' group within the Audit Store 7 ..." 8 I think you say this was something you recall 9 earlier being concerned by; is that right? 10 A. Yes. 11 Q. If we turn the page, please, to look at Matter 5, 12 Matter 5 is: 13 "Horizon provides visibility to subpostmasters of 14 all centrally generated transactions processed to their 15 branch ledgers." 16 We see (3), "Balancing transactions"; do you 17 remember if that caused you any concern at the time? 18 A. I honestly cannot remember if I, at the time, was 19 concerned by that. I do remember concern about the 20 document. I remember concerns that the email was too 21 positive and I remember the Matter 3. I may well, also 22 have been concerned about that but I honestly cannot 23 remember. 24 Q. Looking at it, what it says is, firstly, Fujitsu can 25 create transactions in branch ledgers, yes? 78 1 A. Yes. 2 Q. Post Office said that that was visible to 3 subpostmasters? 4 A. Yes. 5 Q. But, of course, Deloitte hadn't been able to test that, 6 just assumed it was true. Fujitsu claimed it had only 7 been used once but hadn't been tested, and there was no 8 knowledge of its use before 2008. 9 Now, we saw in the minutes of the Board on 30 April 10 that remote access, or 'phantom transactions', as you 11 referred to it then, was a core issue. Surely this 12 would have set off alarm bells for you? 13 A. I think that -- so, even when I read thorough this, I'm 14 still of the impression that a change is visible. So if 15 a change is made that if I then follow the flow of 16 information, either through the central database or 17 through the audit store, that is a visible transaction. 18 The one issue that I think did worry me is the Matter 3 19 where it said "I haven't seen any documented controls 20 about this, and if, if, if, then there's a risk". So 21 absolutely it would say, okay, so what -- are there 22 documented controls that you just haven't found, are 23 there people who have all that relevant access? So 24 questions that need to be answered. But if they are 25 answered, I am still of the understanding that this 79 1 needs to be visible. 2 I didn't say, "And, actually, previously Gareth 3 James said all transactions are visible", which is why 4 he thinks it would be easy to do the validation. That 5 is in the Board meeting. So the fact that it is 6 visible, I think, reassured me. 7 Q. I can't see the [draft] transcript, when you said that 8 Gareth James said to you about transactions being 9 visible, what words did you use: 'transaction' and then 10 what was the one that followed? 11 A. So Chris Aujard, I think it's in the minutes -- 12 Q. Sorry, I asked you to clarify your evidence on what you 13 said Gareth James said about transactions. 14 A. So Gareth James -- it is recorded in the minutes that 15 Gareth James said to Chris Aujard, who reported it to 16 the Board, that because transaction corrections are 17 visible, it would be easy for him to do his work. 18 Q. So, at the time, did you have in your mind the 19 difference between transaction corrections and what 20 I just took you to in Matter 5, which was a balancing 21 transaction? Do you understand the difference between 22 them? 23 A. At the time, I don't think that I was probably 24 sufficiently aware of the difference between them but 25 I still had an underlying belief that a change, any 80 1 change, would be visible. 2 Q. So, based on this desktop report, I think did you accept 3 that it left a lot of questions unanswered? 4 A. Yes. 5 Q. Why was this report not discussed at the Board? 6 A. So the Board meeting -- it was never due to be discussed 7 at the Board. 8 Q. Well -- sorry can you explain why that was because -- 9 A. Sorry, let me answer your question. So it wasn't ever 10 due to be discussed at the Board. It was due to be 11 discussed at the Sparrow Subcommittee meeting and, 12 actually, that's the right place for it. This is a very 13 detailed piece of work, the Sparrow Subcommittee had 14 commissioned it, they'd done the terms of reference for 15 it, they had been involved in it on their 9 April and 16 30 April meeting and we, the Board, had been told late 17 May that it was going to be considered at the Sparrow 18 Subcommittee meeting, and when the email came out, from 19 Chris on the fourth, it also said that it would be 20 considerate at the Sparrow Subcommittee meeting. 21 It wasn't due to be considered at the Board. It 22 would be a pointless thing to set up a Sparrow 23 Subcommittee, get them to be spending lots of time 24 understanding it, and then for the document to be 25 considered at the Board. 81 1 Q. Well -- 2 A. The Sparrow Subcommittee is the right place for it to be 3 considered. 4 Q. -- just pausing there. The Board had brought Gareth 5 James in for an interim presentation on where Deloitte 6 was. Correct? 7 A. Yes. 8 Q. Yes? 9 A. Yes. 10 Q. So the Board at that point obviously thought that it was 11 sufficiently serious or important to go over with 12 Mr James his findings to date, correct? 13 A. Yes. 14 Q. The Subcommittee, as you say, can consider the report 15 but the fact that the Subcommittee considers it doesn't 16 stop the Board also considering it as well, does it? 17 A. But the Subcommittee should consider it first, in far 18 more detail than the Board would consider it. 19 Q. But why, when we've discussed what your views were on 20 the report, why was this never brought back to the Board 21 for a discussion of what's happening next; what are we 22 doing next? 23 A. So it should have been. I cannot tell you exactly why 24 it wasn't. My view is that it should have been 25 considered by the SSC in detail and then a summary of 82 1 that should have been articulated to the Board, and I do 2 not think that either of those things happened with 3 hindsight. 4 Q. Was it not brought back to the Board because the Board 5 didn't want to delve into the unanswered questions and 6 know the answers? 7 A. Absolutely not. The Board -- the NEDs, not once in all 8 my time there did the NEDs not want to get to the truth. 9 Not once did they avoid a difficult conversation or 10 an uncomfortable truth. There is no benefit for a NED 11 in doing that and there was no behaviour that I saw from 12 any of the NEDs that did that. So absolutely not. 13 I cannot explain to you why it was not considered at the 14 SSC, and I cannot explain to you why it was not brought 15 back to the Board. 16 Q. Because what -- again, just looking here, we've had 17 a Magic Circle firm give written advice and a Magic 18 Circle partner go to the Board and talk on that advice, 19 a decision made to commission some work. The work is 20 commissioned by Deloitte, a Deloitte partner comes to 21 the Board and talks about it. This is then sent to the 22 Board and then it appears, from your evidence, that it 23 just drop off everyone's radar. Why didn't you ask in 24 any questions of or follow-up on this with, even outside 25 the Board, with Paula Vennells? 83 1 A. So it was clear from both the SSC on 31 May and also 2 from the email that we -- that came with the report on 3 4June, both of them were very clear that that is would 4 be considered by the next meeting of the Sparrow 5 Subcommittee. I 100 per cent think that is the right 6 place for it. The Sparrow Subcommittee has got the 7 Chairman, the Chairman of the Audit Committee, the 8 shareholder representative, at the CEO and the General 9 Counsel, so the five perfect people to do that. Two of 10 those are -- two of those are accountants, you've got 11 legal skills, you've got better IT skills than the rest 12 of the Board so the Sparrow Subcommittee have got the 13 expertise and the time to review, ideally not just the 14 Board summary but the full Deloitte report. 15 Q. Can we -- 16 A. So that is -- 17 SIR WYN WILLIAMS: Sorry, stopping you there, Mr McCausland, 18 the obligation -- I'm calling it obligation because you 19 said that it should have been considered subsequent to 20 that Sparrow Subcommittee meeting -- who bore the 21 obligation to ensure that it was discussed? Tell me how 22 it would work in practice? Who should have, in effect, 23 insisted on a discussion by the subcommittee? 24 A. So the agenda for the subcommittee, I think, would have 25 been created by Alice, with help from Alwen, who, as 84 1 Company Secretary, would determine all agenda. 2 SIR WYN WILLIAMS: Right. 3 A. There are action points from the previous subcommittee 4 saying that the report would be considered at the next 5 meeting of the Sparrow Subcommittee. So that's how it 6 would have -- it should have been on the agenda for the 7 next meeting of the Sparrow Subcommittee. 8 SIR WYN WILLIAMS: So I'll summarise it, then you say 9 whether you agree. 10 As I see it, there's a failure in process in 11 ensuring that it's not on the agenda for the next 12 meeting but then there's a collective failure of the 13 five people who formed that subcommittee, nonetheless, 14 to ensure that they discuss it; is that fair? 15 A. That is fair. 16 SIR WYN WILLIAMS: Fine. 17 MR STEVENS: Thank you, sir, that actually was my next set 18 of questions, so it's probably a good time -- 19 SIR WYN WILLIAMS: I'm very sorry, Mr Stevens, I just 20 thought I wanted it clear while it was in my head. 21 MR STEVENS: Yes, I'm always glad when you ask questions 22 before me. 23 Sir, on that basis, it's probably a good time for 24 the break because I'm going to move on to a different 25 topic. 85 1 SIR WYN WILLIAMS: Fine. All right, what time shall we 2 resume? 3 MR STEVENS: 12.25, please, sir. 4 SIR WYN WILLIAMS: Fine. 5 MR STEVENS: Thank you. 6 (12.16 pm) 7 (A short break) 8 (12.25 pm) 9 MR STEVENS: Sir, can you see and hear us? 10 SIR WYN WILLIAMS: Yes, thank you. 11 MR STEVENS: I'm going to go on to a different topic, 12 Mr McCausland. 13 Now, I'm going to ask now about both the Clarke 14 Advice and the review of disclosure to subpostmasters 15 who had been convicted. I'm later going to ask you 16 about the oversight of prosecutions and ongoing 17 prosecutions. At the minute, I'm just limiting to 18 convictions themselves. 19 A. Okay. 20 Q. Can we please bring up POL00099026, and this is an email 21 from Paula Vennells to you on 6 July 2013. So we're 22 back in the chronology, after the Board meeting where 23 the upcoming Second Sight Report was discussed, which we 24 went to earlier, but before the report had actually been 25 received. 86 1 I don't need to go through all the summary, if we 2 can turn the page, please, and go to the bottom of 3 page 2. It says: 4 "One of the main reputational and potentially 5 financial risks arising from the review relates to 6 possible attempts to reopen past prosecutions based on 7 the findings. James Arbuthnot was certainly focused on 8 this. We had a stronger exchange on this point. It is 9 not clear that any new evidence has emerged. If it 10 does, then as pointed out to James, legal routes to 11 appeal already exist. Susan and the Legal Team are 12 working with our external lawyers to consider whether 13 there are any implications arising from the report for 14 past cases and we can provide a further update on this 15 work next week." 16 Do you remember when the issue of past prosecutions, 17 to use Ms Vennells' words, being reopened, do you 18 remember when that was first drawn to your attention? 19 A. At this stage. 20 Q. What did you make of that? 21 A. Interested to know more. I mean, to be honest, at that 22 stage, I knew very little about prosecutions. I didn't 23 know much about civil versus criminal, I didn't really 24 understand that we did our own prosecutions and I didn't 25 really understand what it was in the Second Sight review 87 1 which would lead to past prosecutions being reopened, 2 and therefore read it and went "Interesting, keen to 3 know more". 4 Q. That can come down. Thank you. 5 We're going to turn in a moment to the Board meeting 6 on 16 July 2013 at which you were not present. You 7 received the Interim Report on 8 July and read it at 8 some point before that Board meeting. 9 A. Yes. 10 Q. Do you recall having a discussion with either a non-exec 11 or a member of the Executive about this issue of past 12 prosecutions, following receipt of that email but before 13 the 16 July Board meeting? 14 A. I don't -- so I don't think that that would have 15 prompted it. When the -- there was a paper which came 16 out on 12 July from Susan, which did talk about wrongful 17 prosecutions and I would have had a conversation with 18 Alice about the Board meeting. So I will have read the 19 Board papers cover to cover and I will have had 20 a conversation with Alice about anything which I wanted 21 to bring up at the Board meeting. 22 I honestly cannot remember if wrongful prosecutions 23 were there but I would guess that they were. 24 Q. Was this, to that point of your career, a unique moment, 25 dealing with past prosecutions? 88 1 A. Absolutely, yes. 2 Q. But you can't assist us at all with what you might have 3 discussed with Alice Perkins? 4 A. I cannot. When I read the minutes of the Board meeting, 5 and when I spoke to -- well, I remember reading -- 6 sorry. With hindsight, just to be clear, when I read 7 the minutes of the Board meeting, which I was not at, 8 I was not surprised by the questions and the discussion 9 about wrongful prosecutions, and was anybody implicated. 10 So I would not be at all surprised if I had had -- 11 well, I know I would have had a conversation with Alice 12 and I would not have been surprised if, in that 13 conversation, I would have been worried about the 14 concept of wrongful prosecutions because it absolutely 15 would have been unique and I'd never been involved in 16 anything like that before, so I'd have gone "Oof!" 17 So the concept of who is responsible and is there 18 responsibility on the Board, absolutely that would have 19 been a concern for me. 20 Q. I am going to turn to the minutes in a moment. The 21 Inquiry has heard evidence about that meeting and that 22 Susan Crichton was intended to speak to a paper that she 23 produced -- I think you referred to it already, the 24 12 July paper -- but was kept out of the meeting, sat on 25 the other side of the door, by Alice Perkins, and it was 89 1 Paula Vennells who spoke to the paper. 2 Were you told about that after the meeting by any of 3 the Non-Executive Directors? 4 A. I cannot -- again, I cannot remember but I would guess 5 that Alice would have briefed me about the breakfast -- 6 the pre-Board meeting that took place with the non-execs 7 and about the fact that Susan didn't come into the 8 meeting. So I would guess that Alice did talk to me 9 about that because we would have had a thorough pre and 10 post-brief but I honestly cannot remember the content of 11 that conversation. 12 Q. So you cannot assist us with the reasons for why, at the 13 time, Alice Perkins made that decision to keep Susan 14 Crichton out of the room? 15 A. I'm afraid that I can't, no. 16 Q. From your experience of how these meetings were run, do 17 you consider that to be an unusual decision, to keep 18 Susan Crichton out of the meeting? 19 A. Yes. I do. It absolutely would have been usual and 20 normal for the people who were on the agenda to turn up. 21 I cannot remember another instance where -- no, maybe 22 I can -- but if timing -- if something really overran, 23 sometimes an agenda item would slip to the next Board 24 meeting but it would be very rare for that to happen. 25 Q. Did you speak to Susan Crichton about the decision to 90 1 have her excluded from the meeting? 2 A. I did not. 3 Q. Can we look, please, at the minutes. It's POL00027514. 4 We see it's 16 July 2013. You're noted there as 5 "Apologies for Absence". If we go over the page, 6 please. 7 Sorry, if we could go -- oh no, apologies. 8 Could we go to page 6, please. It says: 9 "The CEO explained that although the Second Sight 10 Report had been challenging it had highlighted some 11 positive things as well as improvement opportunities." 12 Then at (b), it says: 13 "The Board were concerned that the review opened the 14 Business up to claims of wrongful prosecution. The 15 Board asked Susan Crichton, as General Counsel, was in 16 any way implicated ..." 17 An explanation given is there. 18 Either before the meeting or shortly after it, were 19 you given any information about the number of wrongful 20 prosecutions that the Legal team thought there may or 21 may not have been? 22 I'll rephrase the question. 23 A. Yeah. 24 Q. Did anyone explain to you the extent of the risk, in 25 terms of the numbers that they were fearing there may be 91 1 wrongful prosecutions for? 2 A. Yes. So I can't remember if it was -- in which piece of 3 paper but, around that time, I was informed by Susan 4 that, in her view or in the view of the external lawyers 5 assisting her, it would be maybe 5 per cent of the -- 6 yeah, 5 per cent of cases. So in 5 per cent of the 7 cases, I think, was the figure that was used. Yeah. 8 Q. What was your view of that risk; how serious did you 9 think it was? 10 A. Yeah, I mean, so it doesn't matter how many, what 11 percentage. I mean, if there's one, then that's 12 serious. So we -- I would have been worried about 13 wrongful prosecution. 14 Q. So was this an important issue that the Board needed to 15 grapple and maintain oversight of? 16 A. Yes. 17 Q. Just so we're clear, because at various points in the 18 chronology we see subcommittees being made, there was no 19 subcommittee created to look at the past prosecutions, 20 was there? 21 A. No. 22 Q. Was this considered to be a matter for the full Board 23 itself? 24 A. Yes. At this stage, there was no Sparrow Subcommittee. 25 Q. If we look down, just to cover one point before carrying 92 1 on with this theme, it says (c): 2 "The Board expressed strong views that the Business 3 had not managed the Second Sight review well and 4 stressed the need for better management and cost control 5 going forward." 6 Is that something you had discussed with Alice 7 Perkins before the meeting? 8 A. I'm not sure if I did specifically but I shared that 9 view: that the Second Sight review had taken too long, 10 was taking too long, and the way in which the Second 11 Sight review had been sprung upon the Board, partly with 12 Paula talking about it in the margins of another 13 meeting, on the 1st, and then a very short period of 14 time before it was launched, it just felt like it hadn't 15 been a well-managed process. It felt like we, Post 16 Office, were disconnected from what Second Sight were 17 doing. 18 Q. That document can come down. Thank you. 19 The day before this meeting, we now know that the 20 Clarke Advice had been prepared, the 15 July 2013 Clarke 21 Advice. You've read that as part of the documents that 22 were provided to you by the Inquiry, haven't you? 23 A. I have. 24 Q. You say at paragraph 110 of your statement, that you: 25 "... were unaware of the existence and/or contents 93 1 of Simon Clarke's Advice of 15 July 2013, prior to 2 receiving it as part of the disclosure pack provided by 3 the Inquiry in relation to my Rule 9 Request." 4 Elsewhere in your statement, paragraph 199, you say: 5 "I do not believe that I was told that the reason 6 that we could no longer use Gareth Jenkins was because 7 he had been discredited." 8 A. Yes. Correct on both counts. 9 Q. Can we look at your statement, please, at page 68, 10 paragraph 181. I've taken you here before, it's 11 referring to the sources of assurance or reassurance for 12 the Horizon IT system. If we could turn over the page, 13 please. 14 If you can take it a bit further down, please. 15 Thank you. So on the screen, the third bullet point 16 down, says: 17 "By Fujitsu and their expert witness who would 18 regularly give evidence in court under oath about 19 Horizon's reliability which resulted in convictions ..." 20 Presumably there you're referring to Gareth Jenkins? 21 A. Yes. I did not know Gareth Jenkins' name for much of 22 the time but, yes, I was aware that Fujitsu put up 23 an expert witness who would defend the system. 24 Q. When did you become aware of that? 25 A. I think probably around this time. 94 1 Q. When you say "this time", sorry? 2 A. Summer of '13. 3 Q. Summer of '13. So the Interim Report comes out on 4 8 July, there's the 16 July Board meeting, and you think 5 at some point in between there you have a conversation 6 with Alice Perkins. Do you think it's around then or 7 later? 8 A. Yeah, I don't think it will have been with -- the 9 conversation with Alice Perkins but it was around that 10 time that I learnt that we could no longer use the 11 expert witness who we had. I'm not sure that I was 12 aware that his name was Gareth Jenkins but I was told 13 that -- and I wasn't specifically told: I mean, it was 14 in a document that we needed a new expert witness. 15 Q. Okay. We may come to a document like that in a second 16 but let me clarify this: you say it was in a document, 17 did anyone discuss with you the use of expert evidence 18 orally? 19 A. No. Not that I can recall. 20 Q. That document can come down, thank you. 21 Following the 16 July 2013 Board meeting and this 22 discussion of a review of past prosecutions -- I'm using 23 a very loose term there on purpose -- what were you told 24 about the nature of that review or look-back at past 25 prosecutions? 95 1 A. Sorry, so just to clarify, are you talking about the 2 Sift Review? 3 Q. I want to know, from 16 July onwards, when you were told 4 about a review of past prosecutions, what you were told 5 that review would entail? 6 A. So around the -- I think it was mentioned in the 12 July 7 letter and then it was mentioned in subsequent letters, 8 in subsequent minutes that Susan Crichton had 9 commissioned an external firm, which I think she 10 specified as Cartwright King, to do a review of past 11 prosecutions and to ascertain what needed to be 12 disclosed to those past -- to understand if we needed to 13 disclose the Second Sight review to those past 14 prosecutions. At a consequent time, Brian Altman also 15 then got added into that as an independent review of 16 Cartwright King. 17 Q. Can we look, please, at POL00145891, and can we turn to 18 page 3, please, right at the bottom. 19 Can we go further down, please. Sorry, if we scroll 20 up, please. Thank you. That's it. Sorry I disoriented 21 myself. 22 It's an email from Alasdair Marnoch to Alwen Lyons 23 on 27 July 2013. We see you're copied in. If you go 24 down, please, it says: 25 "For the benefit of other Board members I had a very 96 1 good review with Susan and Alwen earlier this week 2 focused mainly on the history and immediate actions we 3 are taking to dealing with the urgent case review." 4 Then it says: 5 "In our discussion with Susan, Alwen explained why 6 the case review was any going back to 2010 and the 7 significance of a Horizon upgrade (full reconciliations 8 across every site etc). Could Alwen please elaborate on 9 this point as a critical issue will be determining how 10 far back we need to go." 11 Do you recall any discussion firstly on the choice 12 of start date for the review? 13 A. I do not, no. It is -- the choice of start date is 14 referred to in several emails, and I am conscious that 15 Alasdair -- so Alasdair had been asked by Alice to do 16 this, and I think that's in a previous minute. So 17 Alasdair is having a conversation, and Alasdair is 18 talking to Susan and Alwen about the choice of start 19 date but I don't remember being involved in any of those 20 conversations myself. I was aware of it. 21 Q. Outside of this email did you discuss with either 22 Alasdair, Susan Crichton or Alwen Lyons any of the 23 issues raised in that email? 24 A. I don't believe that I did. I certainly had 25 a conversation with Alice regarding these issues but 97 1 I cannot remember having a conversation with Alasdair, 2 Alwen or Susan. 3 Q. When was the conversation with Alice? 4 A. It will have been when I was back from France. I cannot 5 tell you the date. I mean, I'm guessing sometime after 6 16 July. 7 Q. Do you recall what was discussed in that conversation 8 with Alice Perkins? 9 A. Really a summary of what happened at the Board meeting 10 and at the breakfast meeting. Again, I cannot recall 11 the content of it but it will have been going through 12 the Board meeting and her take on the various 13 discussions in it. So it won't have been very different 14 from the minutes. 15 Q. If we can go up the page, please. We see there's 16 an email for Martin Edwards with a different note. If 17 you carry on going up, please. There's an email from 18 Alice Perkins there, which we will probably come back to 19 later on. If we can carry on going up. 20 Susan Crichton emails you on 7 August 2013 and says: 21 "Neil -- please let me know if you would like to 22 discuss this issue or want an update and I will put some 23 time in the diary when you are next in the building." 24 Your reply is: 25 "Thanks very much Susan. 98 1 "I think I am up to date, and understand the issues, 2 so probably no need for a special update." 3 Why did you feel at this point it was not important 4 to talk to Susan Crichton about the criminal case 5 review? 6 A. Because I believed that I was up to date. I would have 7 had a conversation with Alice, and so Susan isn't 8 saying, "Neil, I've got some really important 9 information I need to share with you". Susan is saying, 10 "Please let me know if you would like to discuss this 11 issue or want an update". So I didn't want update; 12 I was up to date. 13 Now, clearly, with hindsight, I would have loved to 14 go that Gareth Jenkins had been discredited, that we had 15 the Helen Rose Lepton report, that the Clarke Advice had 16 come out, which had put a fundamentally different spin 17 on things but that wasn't what she was saying. She was 18 saying do I want an update and would I like to discuss. 19 I believed I was up to date and I was very happy to wait 20 until the next Board meeting or the next time that she 21 was going to update the board. 22 Q. Just so we're clear at this point, so your email is on 23 13 August, we've discussed the sources of your 24 information as being firstly the 12 July paper from 25 Susan Crichton. 99 1 A. Yes. 2 Q. One or two conversations with Alice Perkins? 3 A. Yes. 4 Q. The email below from Alasdair Marnoch? 5 A. Yes. 6 Q. There's a paper which was in your pack and Martin 7 Edwards refers to that paper? 8 A. Yes. 9 Q. Were there any other sources of information you had at 10 that point on the status of the review? 11 A. Not that I can recall. 12 Q. That can come down but can we go, please, to 13 POL00030900. This is a meeting of the Audit, Risk and 14 Compliance Subcommittee to be held on 11 February 2014. 15 We see these are the papers for that, it says, "Agenda" 16 in the top left. If we turn to the second page, please, 17 we see it's a Prosecution Policy paper, and we don't 18 need to go there but, take it from me, it was signed off 19 by Chris Aujard. 20 Could you turn to page 4, please. Paragraph 4.5 21 says: 22 "It should be noted that, although [Post Office] is 23 still able to bring cases where the evidence concerned 24 is extracted from the Horizon system, there is a such 25 risk that in such cases a defence will be mounted to the 100 1 effect that the Horizon system cannot be relied upon. 2 We have been advised that in these cases there is 3 a strong likelihood that such a defence will be 4 successful, at least until such time as a new 5 independent expert is identified and has familiarised 6 himself with the system. This is likely to take around 7 12 weeks, and cost up to £200,000." 8 Was that the document you were referring to earlier 9 when you said that you learnt that the expert couldn't 10 be used in future or did you learn at an earlier point? 11 A. I think I learned at an earlier -- I can't quite 12 remember but I think that I knew it already by that 13 stage. 14 Q. Admittedly it's in the context of whether prosecutions 15 are pursued full stop but it's saying, at the moment, we 16 need to find a new independent expert and that may cost 17 up to £200,000. 18 Did you ask, in February 2014 or before, why you 19 couldn't use the expert who had provided evidence in 20 past prosecutions? 21 A. So at that time I did not ask but my memory is that I'd 22 been told previously that the old Fujitsu expert had 23 moved on and, therefore couldn't be used. 24 Q. Sorry, this is important, please. Who told you that? 25 A. I cannot remember. I'm guessing -- I cannot remember. 101 1 But my mind has it that somebody told me that the old 2 Fujitsu expert had moved on but told me in such a way 3 that I didn't particularly think "Oh, my God, he's been 4 discredited". I thought he's retired, resigned, gone to 5 work somewhere else, we needed to find someone new. 6 Q. So your evidence is it was more of a practical matter: 7 the old expert has gone, we need to find someone else? 8 A. Yes. There was certainly absolutely no hint that the 9 expert had been discredited. So that was 100 per cent 10 not known by me or the NEDs. 11 Q. It's quite a significant point. Can you assist even 12 with when it's likely that that was said? Was this 13 February 2014 or the summer 2013, or in between, 14 I should say? 15 A. I'm pretty sure that I didn't know it when the Second 16 Sight Interim Report came out in the summer of '13 and 17 I'm pretty sure that I did know it when this paper was 18 reviewed by the ARC. As to when it was between summer 19 and February '14, I -- it's somewhere in that period but 20 I honestly cannot tell you when it was. Very happy 21 to -- 22 Q. As we'll turn to -- we'll come to this later on in your 23 evidence -- there was a discussion on the future 24 prosecutorial role of Post Office in November 2013. 25 A. Yes. 102 1 Q. Could it have been around then? 2 A. Yes, absolutely. Yes. That was the precursor for this 3 conversation, so the first meeting of the ARC in 4 November deliberately didn't make a decision. We needed 5 more information, which came to this meeting of the ARC. 6 So I would have been very surprised if I didn't know 7 about it in the November '13 ARC meeting because it 8 would have been very relevant to that. But I have 9 a feeling I didn't learn about it in the ARC; I have 10 a feeling I learnt about it in some different way. 11 Q. So you don't think it alerted in the ARC -- Audit, Risk 12 and Compliance meeting -- you think it was probably at 13 or before November 2013. What other way do you think 14 you may have been told of that information? 15 A. Either through Susan or Paula or Lesley, probably at 16 a Board meeting. That's probably the -- yeah, that's 17 the most likely way. 18 Q. You say -- we don't need to bring it up -- at page 71, 19 paragraph 186 of your statement: 20 "It has subsequently become clear that I was not 21 provided with or made aware of Simon Clarke's 22 appointment or the reports he provided. That is wholly 23 unacceptable. However, I do not regard this as a lack 24 of oversight on my part. I cannot have oversight of 25 matters of which I have no knowledge." 103 1 Can you assist us with what you would have done if 2 you read the report when you were Senior Independent 3 Director? 4 A. So, if I go back to the Interim Second Sight Report, 5 I was, as I've said before, pleased that we seemed to be 6 finding some reasons for the unexplained losses, and 7 that gave us something to do, frankly. So, yeah, we'd 8 gone into the Working Party, the Mediation Scheme, the 9 Business Support Programme. We then reviewed past 10 prosecutions but we reviewed them in the context of is 11 there something in the Second Sight Report which should 12 be disclosed to those past prosecutions? 13 Had, at that time, I been told Gareth Jenkins is 14 discredited as a witness and has been giving false 15 evidence, the Helen Rose Report and the Simon Clarke 16 really very clear report, basically saying serious risk 17 of wrongful prosecutions, then I think we would have 18 approached the subsequent period very differently. So 19 we went into that subsequent period thinking that there 20 was a -- that we needed to disclose information to 21 a small number of past prosecutions, and we were 22 disclosing the Second Sight evidence. 23 That was my understanding. That was what we were 24 told. So the reason for reviewing the past prosecutions 25 was the Second Sight Report. 104 1 The real reason, as I understand it now, is that we 2 had been prosecuting -- we had been using a tainted 3 witness and we had had serious risk of wrongful 4 prosecutions and, therefore, the Simon Clarke Advice, 5 coupled with the Gareth Jenkins information, clearly 6 they're linked, I think would have absolutely made us 7 take a very different tack. 8 Q. In terms of what actually happened, what recollection do 9 you have of how the Board oversaw the review and 10 conducted oversight of it from August onwards? 11 A. So we were clearly concerned, as the minutes from the 12 July board meeting show, we were concerned about 13 wrongful prosecution and we were concerned about that in 14 a number of different ways. We were concerned -- 15 clearly, the very fact that we're doing wrongful 16 prosecution and the impact on those individuals; we were 17 concerned from the company's point of view because that 18 exposed us to financial risk, reputational risk, legal 19 risk; we were concerned from an individual point of view 20 who was doing that. So we were concerned about a lot of 21 different aspects and, therefore, we wanted more than 22 just Susan, because Susan might be implicated, and 23 therefore we wanted a legal firm to do that. 24 And we also then wanted somebody else, which was 25 where Brian Altman came in, to review the fact that we 105 1 were reviewing it. So, effectively, we were trying to 2 get two layers of assurance. 3 Q. Were you aware -- 4 A. General Counsel, Cartwright King -- 5 Q. Were you aware that Cartwright King had been involved in 6 conducting prosecutions for Post Office at the time when 7 they were instructed? 8 A. No, I wasn't. It -- I was not aware of that. That 9 linked hadn't been made. I don't know if I had ever 10 previously seen a piece of paper that said Cartwright 11 King were doing criminal prosecutions but I certainly 12 didn't put those two things together. 13 Q. In your statement, you refer to the Advices of Brian 14 Altman KC. Were you provided with any of those notes of 15 advice? 16 A. Sadly not. Again, with hindsight, I understand that 17 Brian Altman also referred to other things that weren't 18 brought to our attention. We were basically given 19 a very anodyne, positive report to say that Brian Altman 20 said that our approach was sound, which again, with 21 hindsight, is not correct. 22 Q. Without hindsight now, that's what I want to look at, do 23 you think the Board, when presented with such a serious 24 issue, should have requested to see the notes of advice 25 of Brian Altman, of which it was aware? 106 1 A. So with hindsight, I wish we had. At the time, if 2 I have the General Counsel of the company saying 3 something to me, backed up by an external law firm, 4 backed up by a KC, frankly, I'm not expecting the 5 General Counsel to be lying or misleading me. 6 MR STEVENS: Sir, I'm going to go to a different topic, so 7 it's probably a good time to stop there for lunch. 8 I don't have much more to go and there's a few questions 9 from Core Participants but I don't think it would merit 10 working through lunch at this stage. 11 SIR WYN WILLIAMS: That's fine, Mr Stevens. 12 Mr McCausland, I want you now just to answer this 13 question from your general experience as a Non-Executive 14 Director and, therefore, what you would expect to happen 15 as a Non-Executive Director of a company like the Post 16 Office. Can you think of any good reason why the 17 substance of Mr Clarke's Advice, even if not the actual 18 Advice itself, would not have been discussed at Board 19 level? 20 A. I cannot think of any good reason, sir. I think, under 21 any circumstance of any Board that I have served on, 22 I would have expected that information to have come to 23 the Board and to be, you know, rigorously and in a very 24 untainted way, laid out in front of the Board. 25 If I am honest, sir, I think the bit about Susan 107 1 being left outside on a chair is a bit of a red herring. 2 It's clumsy, it shouldn't have happened but it is 3 Susan's job, as General Counsel, to inform the Board of 4 hugely relevant pieces of information, which, as I've 5 said, I fundamentally believe would have changed the way 6 that we operate, and for those pieces of information not 7 to have been disclosed -- and it's not a case of doing 8 it on a phone call. I mean, it's a very important piece 9 of paper which should either have been in her Board 10 report or sent around as a note or sent around on 11 a phone call. We arranged Board meetings and Board 12 information very regularly and, for those pieces of 13 information not to have been shared, I think it's wrong. 14 And subsequently, I don't think those pieces of 15 paper, that information was shared at all. So I don't 16 think it went to the CCRC. I think it was airbrushed 17 from history very consistently, which I have absolutely 18 no reason why that would be the case which is 19 acceptable. 20 SIR WYN WILLIAMS: All right. Thank you. 21 2.05 okay, Mr Stevens? 22 MR STEVENS: Yes, sir. Thank you. 23 SIR WYN WILLIAMS: Fine. 24 (1.04 pm) 25 (The Short Adjournment) 108 1 (2.05 pm) 2 MR STEVENS: Good afternoon, sir. Can you see and hear us. 3 SIR WYN WILLIAMS: Yes, thank you very much. 4 MR STEVENS: I will continue. 5 Mr McCausland, I've got a few more, more discrete 6 smaller topics to cover this afternoon morning, and I 7 want to start with the resignation of Susan Crichton. 8 We don't need to turn it up but in your witness 9 statement at paragraph 146, you say you aren't aware of 10 the reasons as to why Susan Crichton resigned, correct? 11 A. Correct. 12 Q. The Inquiry sent you or gave you this morning two 13 documents, so you didn't have those at the time you made 14 your witness statement. I want to look at them now and 15 explore them with you. Please could we bring up 16 POL00381628. It's an email from Paula Vennells on 17 2 September 2013 to you. That says: 18 "Neil, I have tried to help our discussion tomorrow 19 (today!) by providing a background brief. This is 20 a private note; and views in it may change as more 21 information comes to light. I'd be grateful if you 22 would treat it as such. 23 "Thank you for being available at such short 24 notice." 25 My reading of that is there's a note being sent to 109 1 you for discussion in the future; is that your 2 understanding? 3 A. That is. 4 Q. The subject says, "Our meeting -- P&C"; do you know what 5 that means? 6 A. Private and confidential, I guess. 7 Q. I'll come to the note in a moment but do you recall 8 receiving this and the discussion which we're about to 9 turn to? 10 A. I didn't have any recollection of it before you showed 11 it to me this morning. Now that you have showed it to 12 me, I do have a vague recollection of it, yes. 13 Q. That document can come down for the time being. Before 14 we turn to the note, can you recall what Paula Vennells 15 told you was the reason she wanted to speak, before that 16 email was sent? 17 A. I -- my memory, which is not perfect at this stage, but 18 my memory is that she was coming to me in my position as 19 SID because the Chair, Alice, and the General Counsel, 20 Susan, were having an issue and Paula probably felt 21 caught in the middle and Paula came to me, which is 22 appropriate in the case where there is some issue with 23 the Chair, and wanted my advice, wanted my guidance, my 24 opinion, my counsel. So I think Paula is trying to draw 25 me into the issue regarding Susan and Alice and the 110 1 chain of emails which follows. 2 Q. Let's have look at the note that was attached, please. 3 It's POL00381629. You see it says, "File notes SC/PV 4 [Susan Crichton/Paula Vennells], Friday 30/9". That's 5 been established should be 30 August, rather than 6 30 September. 7 I'm not going to read all through this but could we 8 please turn to page 3, first. It says. 9 "Neil, this the end of the brief for our discussion. 10 There are more notes below as context if you have time. 11 But not imperative." 12 So that's just to coordinate where we are in the 13 notes. So if you go back up, please, thank you. 14 Go back up to page 1, thank you. Further down, 15 please. So there's a note here of the conversation. In 16 the paragraph that says, "She again raised that Alice 17 had made mistakes", it goes on to say: 18 "And I said that whilst I would be asking Alice 19 about a couple of challenges Susan raised (Alice 20 believing Donald and BIS [Department for Business, 21 Innovation and Skills] comments about a PO cover-up?) 22 ..." 23 Do you remember discussing that aspect of the note 24 with Paula Vennells? 25 A. I saw that this morning and was -- yeah, was interested 111 1 in it but I do not have any recollection of that at the 2 time. 3 Q. If we go back to page 3, please, we've got the 4 "Reflections" section. Now, just up slightly again, 5 please. Thank you. It says, as we've said here before: 6 "Neil ... There are more notes below as context if 7 you have time. But not imperative." 8 Would you have read the remainder of the document? 9 A. Yes. 10 Q. Third paragraph down, it says: 11 "Susan had said to me prior to my leave, that she 12 would never have put a business she worked for in the 13 situation we found ourselves with the [Second Sight] 14 Interim Report, and she wished she had never allowed 15 Alice to persuade her to do the independent review." 16 Do you recall discussing that aspect with Paula 17 Vennells? 18 A. Well, this is fresh in my mind from this morning and my 19 mind hasn't had a long time to think about it, so 20 I really cannot remember the conversation I had with 21 Paula, you know, more than 10 years ago. I'm sorry, 22 I can't flesh that out. I'm sure I would have read the 23 note; I'm sure I spoke to her about everything in the 24 note but I cannot remember the details of that 25 conversation, I'm afraid. 112 1 Q. So if I asked you any more questions on this, you 2 wouldn't be able to assist us with what was said at the 3 conversation? 4 A. I can -- I won't -- I will not be able to remember the 5 actual conversation. I'm happy to reflect on what 6 I think I would have said but, as to what I actually did 7 say, I would struggle. 8 Q. Do you have any recollection at all about how the 9 conversation went? If it's not precisely words that 10 were used but the overall tenor of the conversation? 11 A. Yes. So -- or do I? I'm not sure if it's an actual 12 recollection or what it's what I am imagining what was 13 said. But I think that I -- my reaction to Paula would 14 have been that Susan is being overemotional about it. 15 She should have resigned over the Second Sight Review 16 nonsense. You know, we were right to do the Second 17 Sight Review, there was nothing wrong with doing the 18 Second Sight Interim Report, that's no reason at all to 19 resign. That's daft. And, being left in the corridor 20 outside the board meeting, yes, it's clumsy, but it's 21 not a resigning matter. 22 I mean, Post Office was in a real mess. We were 23 doing all sorts of things. There were lots of other 24 members of the Executive who would come in to the Board 25 meeting and frankly get a hard time. So Kevin would 113 1 come in and be, you know, talked about, about the 2 network. Martin, Nick -- it was a robust environment. 3 So for somebody to be upset about being left in 4 a corridor: get over it. It's not a resigning issue. 5 So I think I would have been relatively robust with 6 Paula that this Susan's job. Just, you know, tell her 7 to get on with her job and not be so sensitive. That's 8 probably what I would have said. That's my vague 9 recollection but I honestly cannot remember the 10 specifics of that conversation. 11 Q. Can we look at an email sent around that time. It's 12 POL00146244. So the email I took you to earlier was on 13 2 September 2013 in the evening. This is an email from 14 Paula Vennells to you on 3 September in the morning. 15 "Neil, sorry to bombard you with emails but this is 16 useful; ideally you should read this after my briefing 17 note. 18 "I think indicates a way through." 19 This is also dealing with what you were discussing 20 at that conversation. If we look down, please, it's 21 Hugh Flemington, he sort of sets it out and says: 22 "[Please] see comments below from both Simon 23 Richardson and Andrew Parsons regarding risks of LL 24 review ..." 25 That's the Lessons Learned Review, isn't it? 114 1 A. Yes. 2 Q. Just for context, the Lessons Learned Review is the 3 review the Board asked to be carried out into how the 4 Second Sight Review had been handled within the 5 business? 6 A. Yes. 7 Q. As we see, we have an email there from Simon Richardson 8 and, if we turn, please, to page 2 at the bottom. We've 9 got one from Andrew Parsons, also of Bond Dickinson. 10 Would you have read these emails? 11 A. Yes. 12 Q. Do you recall speaking about them with Paula Vennells? 13 A. Vaguely. 14 Q. What is your vague recollection? 15 A. So Alice had asked for a Lessons Learned Review after 16 the Board meeting on the 16th, where the whole Board 17 were dissatisfied with the progress. Initially, that 18 was due to be done by Alasdair as Chairman of ARC. That 19 had then migrated, which I'm not sure I was aware of, 20 but it migrated to Richard Hatfield, and this email here 21 is basically then Susan arguing -- Susan getting 22 a lawyer's opinion to ask why we shouldn't be doing it. 23 So, at the time, I think I was frustrated and 24 I was -- I remember being frustrated by the whole of the 25 Lessons Learned Review because, actually, I wanted to do 115 1 a Lessons Learned Review. I don't think the business 2 had handled it well and, therefore, you should 3 understand it and learn from it. And we were being 4 steered away from this Lessons Learned Review by lawyers 5 telling us it was a bad thing and we would put ourselves 6 at risk and, therefore, I think that I would have 7 accepted it because it was quite strong legal advice 8 saying, from a business point of view, we should not do 9 that but, at the time, I do remember being very 10 frustrated by the Lessons Learned Review. 11 With hindsight, I see it very differently and it 12 feels like Susan is -- one of the reasons that she's so 13 against it is because she's frightened that the Lessons 14 Learned Review is going to turn up some of the things 15 that, frankly, should have come to the Board and didn't. 16 Q. Pausing there, we've seen a document by Belinda Crowe 17 setting out Lessons Learned and how to deal with things 18 like Second Sight Review going forward. 19 A. Yes. 20 Q. In your evidence then you accepted it. Were you 21 referring to the legal advice here in these emails, that 22 you accepted this legal advice? 23 A. Yes. 24 Q. So we know that there was a Lessons Learned Review that 25 was actually commissioned and finished by Belinda Crowe. 116 1 Did this legal advice here change the scope of that 2 review? 3 A. Very much so, yes. So the original scope was going to 4 be done by Alasdair, understanding, talking to Susan, 5 then it went to Richard Hatfield and then I think 6 Susan -- we all hoped it would become a big review but 7 clearly Susan didn't hope that. And then, after this 8 legal advice, the scope changed and got downsized very 9 significantly into a fairly dull piece of work that then 10 did come out from Belinda as the Lessons Learned Review. 11 Q. If we turn to page 3, please, one of the points made by 12 Mr Parsons refers to disclosure of the review. We see 13 something the Inquiry sees a lot, a point on privilege: 14 "This Review will not be legally privileged." 15 But then it says under "Criminal disclosure": 16 "Should the review reveal any concerns about Horizon 17 or branch accounting processes, then Post Office may be 18 obliged (under Criminal Procedure Rules) to proactively 19 pass this information to subpostmasters involved in 20 criminal prosecutions (both ongoing and historic). In 21 particular, recommendations for change could be 22 interpreted as highlighting historic problems that would 23 need to be disclosed." 24 Are you saying you accepted that legal advice? 25 A. So there is quite a lot of argument here. I think there 117 1 are two documents there, aren't there? There are two 2 different people? 3 Q. Yes. 4 A. There's an email basically saying why we shouldn't do it 5 and then there's a report saying why we shouldn't do it. 6 So I don't think that would have gone into any of the 7 individual lines in that much detail but I would have 8 read it and thought we were being told very clearly by 9 two different external lawyers that it is a bad idea for 10 the business to do this and, therefore, I am not 11 a lawyer, I have no legal experience and to go against 12 my General Counsel, backed up by two external lawyers -- 13 I mean, I wouldn't; I would take their advice. 14 Q. Is it fair to summarise it this way: you and Alice 15 Perkins wanted more of a larger review than, in fact, 16 happened? 17 A. Yes. 18 Q. Susan Crichton obtained this legal advice from Bond 19 Dickinson, you felt you needed to accept the advice from 20 the lawyers and that resulted in the Lessons Learned 21 Review being narrowed in scope? 22 A. Yes. 23 Q. Thank you, that document can come down. 24 At the time, did you have any concerns as to Susan 25 Crichton's motives for seeking to narrow the scope of 118 1 the Lessons Learned Review? 2 A. No. I didn't and, frankly, even when Susan Crichton 3 resigned, I didn't suspect that she had bad motives in 4 doing that. As this Inquiry has peeled away the layers, 5 frankly, I have become appalled. At the time, I had no 6 feeling of that at all. 7 Q. I want to move now to another topic, it's oversight of 8 prosecutions and future prosecution policy. In your 9 statement, we don't need to turn it up, but it's 10 paragraph 55, you say that, during the recruitment 11 process, you had no knowledge whatsoever with regards to 12 the investigation and prosecution of subpostmasters for 13 theft, fraud, or false accounting. That was September 14 2011. We saw the Board minute on September 2012, which 15 referred to prosecutions. So you were aware, in broad 16 terms, of the prosecutorial function by then? 17 A. Not really. So I was aware that prosecutions were 18 happening. I wasn't aware that we were bringing the 19 prosecutions. 20 Q. If we just bring that note back up of the -- actually, 21 no, we don't need to. 22 So your evidence is January, you were aware that 23 prosecutions were happening? 24 A. Yeah. 25 Q. But just explain what you mean by "not that we were 119 1 bringing them"? 2 A. So when the November '13 report came out for the ARC, 3 explaining the prosecutorial functions, which you took 4 me to earlier this morning, that explained that Brian 5 Altman had done a review and that he explained that 6 Royal Mail Group and POL were virtually the only people 7 to bring their own prosecutions. And when -- if you go 8 back to '11/'12, I was aware that prosecutions were 9 happening but I assumed that they were happening through 10 the CPS or the police. 11 So the concept of a company itself bringing 12 a prosecution, I just had never heard of that, I didn't 13 know about it, I hadn't thought about it. So when I was 14 reading about these prosecutions have happened, in any 15 other world that I'd lived in, there would be 16 an internal investigation team, who would understand the 17 issue but then present evidence to the CPS, and they 18 would bring the prosecution. So that's how originally 19 assumed it had happened. 20 Q. Would you agree that, if a company pursues prosecutions 21 as Post Office did, that is an unusual type of operation 22 for it to be involved with? 23 A. Absolutely. 24 Q. Would you agree that -- and I'm not here pointing to 25 what you were or weren't aware of but, in terms of what 120 1 the board should be doing, would you accept that the 2 Board should have oversight of how those prosecutions 3 are conducted? 4 A. Yes. 5 Q. Do you think you should have -- 6 Sir, it sounds like we have a fire alarm. 7 Yes, so we have a fire alarm. We may have to break 8 for a moment. 9 SIR WYN WILLIAMS: Yes, by all means. I will remain nearby, 10 so to speak, and you can let me know when we're ready to 11 resume. 12 MR STEVENS: Yes, we will remain nearby, sir, but we'll come 13 back as soon as we can. Thank you. 14 (2.25 pm) 15 (A short break) 16 (2.50 pm) 17 MR STEVENS: Good afternoon, sir. Can you see and hear us? 18 SIR WYN WILLIAMS: Yes, I can, thank you. 19 MR STEVENS: Fortunately it wasn't a serious fire alarm so 20 we're back and I'll continue. 21 Mr McCausland, just before the fire alarm, I asked 22 you if the conduct of criminal prosecutions was 23 an unusual type of operation for a company, and you 24 agreed. 25 I then said, without exploring your actual knowledge 121 1 of Post Office's role in prosecuting, would you accept 2 that the Board should have oversight of how those 3 investigations were conducted? Your answer was yes. 4 A. Yes. 5 Q. Just before that, you, in your evidence, said you 6 weren't aware of Post Office's role as a prosecutor in 7 January 2012, that came later. At Post Office, whose 8 responsibility was it for informing Directors like you 9 of its role as a prosecutor? 10 A. I think the prime responsibility was probably with Susan 11 Crichton as GC who ran that area or, before her, I think 12 Mike Young ran the area, and probably Paula as a second. 13 Q. What about the Chair? Does the Chair have any 14 responsibility for the induction of Non-Executive 15 Directors? 16 A. Yes, if the Chair knew. 17 Q. In terms of the systems of oversight -- what I mean by 18 that is what systems should be in place for overseeing, 19 in this case, prosecutions -- who at the Board was 20 responsible for seeing that a system of oversight for 21 prosecution was in place? 22 A. The -- from an Executive point of view, Paula had the 23 prime responsibility for that, in that she ran the 24 company. 25 Q. Would it be a case of Paula Vennells had the 122 1 responsibility of informing the Board of the operation, 2 namely prosecutions, and then the Board would come to 3 its own view of what was appropriate oversight of the 4 executive in those circumstances? 5 A. Yes. 6 Q. I was going to ask you a series of questions about why 7 the Board did not oversee prosecutions until the Interim 8 Report, whilst you were there but your answer to that 9 would be you personally weren't aware of the 10 prosecutions; is that fair? 11 A. I certainly wasn't aware that we did our own 12 prosecutions. As I say, it was just -- I'd never 13 thought of that happening. 14 Q. Were you aware that Post Office -- and again, this is in 15 January 2012 -- had its own Investigation Department? 16 A. Nobody had explicitly said that but I had assumed that 17 was the case and by implicit, yes. So certainly other 18 companies I had worked with would have had their own 19 Investigation Team and I had assumed that there was 20 an Investigation Team in Post Office. I'm not sure that 21 I ever knew who it was or where it was but, yes, I would 22 have assumed it was there. 23 Q. Do you recall whether the Board conducted oversight of 24 the conduct of the Post Office Investigation Team 25 between you joining as a Senior Independent Director and 123 1 the Interim Report? 2 A. I cannot remember that we did, no. 3 Q. Why do you think that was? 4 A. I think probably just because of the weight of other 5 things which were going on and it just -- past 6 prosecutions were not that big a feature for us. 7 Q. Pausing there, I'm talking about ongoing prosecutions at 8 this point, so not things that have happened in the 9 past: prosecutions that Post Office are currently 10 pursuing or will pursue in future. 11 A. So prosecutions, not just past. Prosecutions, were not 12 as big a focus for us as they should have been or as, 13 with hindsight, I would have liked them to be. Our 14 focus was very much on trying to understand the 15 integrity of Horizon, that was the thing that I was 16 hearing from -- Lord Arbuthnot was talking to us about 17 that and that's what the Second Sight Review was about, 18 it was really trying to understand the integrity of 19 Horizon. 20 The conduct of prosecutions, past or present, was 21 not as big a feature and I don't think that we were 22 aware that there was as big a problem as clearly there 23 was. So I think it was a lack of awareness, coupled by 24 the weight of other things which were on our plate: 25 separation, costs, people, culture, revenue. It was 124 1 a very, very busy Board and Horizon absolutely bubbled 2 up as -- the integrity of Horizon bubbled up as 3 something that the Board needed to spend time on. The 4 prosecution function didn't bubble up in the same way. 5 Q. Last question I have on this and it may be this is 6 a very similar answer but the Inquiry has heard 7 evidence, as part of separation, at least one lawyer -- 8 lawyers from Royal Mail Group transferred into Post 9 Office Limited, including a criminal lawyer called 10 Jarnail Singh, and so there was effectively a transfer 11 of part of the Criminal Law Team into Post Office 12 Limited as part of separation. 13 When you were dealing with separation and separation 14 issues, were you at all involved with looking at, 15 overseeing, new parts of the business that had come into 16 the Post Office, such as the Criminal Law Team? 17 A. No, I did have some involvement in the separation issues 18 but they tended to be where there was conflict between 19 Post Office and Royal Mail Group, and there were many 20 such issues, but the normal transfer of people across 21 I did not have sight of. 22 Q. I want to look now briefly at the future prosecutions 23 policy following the Interim Report. Can we look, 24 please, at POL00038678. So we see it's a minute of the 25 Audit, Risk and Compliance Subcommittee held on 125 1 19 November. You're present, second on the line there 2 and, further down, we see both Paula Vennells and Chris 3 Aujard in attendance as well. If we turn, please, to 4 page 3., and the bottom of that page. 5 Chris Aujard updated the Committee on the approach 6 to prosecutions bought by the Post Office and, as we go 7 on to see, it introduces a paper on the prosecutorial 8 role going forward. Was that the first time in your 9 career that you'd been involved in decisions as to 10 a future policy of prosecutions? 11 A. Yes. 12 Q. Can we turn the page, please, to page 4, paragraph (c): 13 "Chris Aujard explained that one of the issues was 14 the perception that subpostmasters had of the Post 15 Office bringing prosecutions of false accounting rather 16 than theft, which was easier to establish. The 17 Committee asked whether the business would still be able 18 to recover branch losses through the Civil Courts. 19 Chris Aujard explained that this would still be open to 20 the Business but it would be slower and not recover as 21 much." 22 Pausing there, to what extent, at this stage, were 23 the Committee seeing that prosecutions was a method of 24 obtaining or recovering money from subpostmasters? 25 A. This -- so at this meeting, we were not being asked to 126 1 make a decision at this meeting and it was very much 2 a questioning session. So particularly the three 3 members of the ARC, Alasdair, the Chair, Tim and myself, 4 were trying to understand how we did it, and so there 5 were lots of questions. Certainly one of those 6 questions was about recovery, and one was about -- the 7 two main areas were recovery and deterrence: how does it 8 work; what are the sums of money? And there weren't as 9 many answers as we wanted which is why we asked for 10 a far more detailed piece of work which subsequently 11 came to the February ARC. 12 Q. You mentioned deterrence and, as we see in the last 13 line, it says: 14 "The Committee supported this but was nervous about 15 changing the approach to prosecutions as in their view 16 this acted as a deterrent." 17 Why was it thought necessary to have a deterrent in 18 the form of Post Office pursuing its own prosecutions? 19 A. It wasn't. So it was felt necessary to have a deterrent 20 but not necessarily for Post Office to bring its own, 21 ie perfectly happy for the CPS to bring prosecution or 22 for the Post Office to bring the prosecution, but to 23 have no prosecutions, that was what was making the ARC 24 nervous. 25 Q. Do you have any recollection -- I should say at (d) it 127 1 says: 2 "The CEO thanked the Committee for the helpful 3 challenge. She stressed that the Business was not 4 saying that it would never bring prosecutions, but that 5 it would be more circumspect in the cases it chose to 6 take." 7 You've mentioned before that minutes are obviously 8 not the full record. Do you have any other recollection 9 of what Paula Vennells said in respect of Post Office's 10 prosecutorial role at this meeting? 11 A. I don't, at this meeting. She subsequently sent around 12 some emails between this meeting and the next meeting 13 with some of her views. I guess that her views were the 14 same but I cannot remember her views at this meeting. 15 Q. I'm not going to take you to the emails, they're 16 a matter of record. I do want to come to one matter 17 which was a potential conflict of evidence. Can we 18 look, please, at POL00030900. I think we've been to 19 this document and we'll see at page 2 it's the report by 20 Chris Aujard. Could we turn, please, to page 3 and, if 21 we could just go down to "Options Considered", please. 22 So the options put forward are (a): 23 "Preserving the status quo -- ie retaining 24 prosecutorial capability and continuing with 25 a prosecutions policy ... 128 1 "(b) Pursuing a prosecutions policy more focusing on 2 more egregious misconduct ..." 3 "(c) Ceasing all prosecutorial activities ..." 4 In your witness statement, at paragraph 157, which 5 is page 59 -- we don't need to bring that up -- you say: 6 "My recollection is that myself, Alice Perkins and 7 Susannah Storey were largely in support of Option 3, 8 whereas the Executive largely favour option 2." 9 That still accords with your recollection? 10 A. It is. 11 Q. Why did you favour Option 3? 12 A. So, in this meeting, I was trying to understand two 13 things: first of all, the recovery; and, secondly, the 14 deterrent. And if we look at the recovery -- so there 15 was a chain of emails before this where I was 16 questioning Chris on the amounts and, if I could ask you 17 just to scroll up a little bit to 3, just there is fine. 18 This document I then emailed Chris to say, "Help me 19 understand these figures a bit more", and it became 20 apparent from this that, in criminal prosecutions -- 21 forgive me if I get those numbers slightly wrong -- in 22 criminal prosecutions we had losses of 1.6 million and 23 we recovered 740, however, it had cost us 500,000 to do 24 so, because we employed a small army of lawyers, and 25 each recovery cost about £7,500. So net, net, net, we 129 1 were recovering 200,000 from 1.6; whereas civil, we were 2 1.9 and it was costing us about 100,000. 3 So, from a recovery point of view, we were actually 4 much better using civil, rather than criminal, which 5 wasn't clear and that wasn't evident from either of the 6 papers, which was why I was trying to unpack that and 7 understand it, and I was wise encouraging Chris to 8 actually unpack civil, because all of his paper and all 9 of the ARC policy was about criminal and civil was dealt 10 with very separately. So I'm saying should we not be 11 looking at civil as well because, actually, from 12 a recovery point of view, civil seems to be working much 13 better than criminal. 14 Separately, we were looking at a deterrent, and 15 I think that everybody in the ARC felt that there should 16 be some deterrent, ie there should -- we shouldn't just 17 stop all prosecutions. But I don't remember any of the 18 NEDs saying that we should be doing it ourselves. All 19 of the NEDs, from memory -- this is a long time ago, but 20 all of the NEDs, from memory, thought it was weird that 21 POL was bringing its own prosecutions and, therefore, we 22 were coming to this from an instinctive point of view to 23 say, yes, we should continue to do prosecutions, ideally 24 those are probably done by the CPS, and civil is 25 actually better than criminal from a recovery point of 130 1 view -- understand that the two things are separate. 2 However, there was strong arguments put by Paula 3 that said we're in transition here, we've got the 4 Business Support Programme happening, we've got 5 Mediation Scheme happening, the CPS is overloaded and 6 our advice is that the CPS actually may not be able to 7 do anything, and therefore we should, whilst moving 8 towards Option (c), let's do it gradually, let's take 9 a step towards Option (b) and then maybe we'll review it 10 and go to Option (c). 11 And because all prosecutions were paused -- because 12 we had paused all prosecutions -- I thought that was 13 okay. So my instinct, and I think the NEDs' instinct 14 was Option (c) is better, because, you know, why do we 15 need to have an army of criminal lawyers ourselves do 16 the investigation and then hand it over to the CPS as 17 long as CPS would prosecute some, the worst but, as 18 a stepping stone, happy with Option (b) because, 19 frankly, it wasn't going to make much difference because 20 we weren't doing any prosecutions anyway. 21 Q. That document can come down. Thank you. 22 Alice Perkins said in her evidence that she recalled 23 you being in favour of option 2. I assume, I take it, 24 that your position on that is that she's mistaken? 25 A. I ended up supporting the Option 2. So she may -- I'm 131 1 not sure when in the debate she was talking about. So 2 my instinct -- and I think I started off going Option 3 (c) is better, but I was okay with Paula's arguments and 4 therefore I did support Option 2 as an interim step. 5 I mean, and the paperwork is quite clear that it's a, 6 you know, pro tem interim step. 7 Q. As part of this conversation, this debate, did Chris 8 Aujard say anything about the future costs of bringing 9 prosecutions, namely the cost of a new expert? 10 A. So in the previous ARC, I think there was that reference 11 that you took me to earlier that said that, if we were 12 to do a -- 13 Q. This is in this paper. The paper is the February -- 14 A. I don't recall that coming up in the February paper but, 15 certainly from the November paper and therefore in my 16 mind, will have been that we need to have a new 17 independent expert and there will be a cost to get that 18 person up to date. 19 Q. Sorry, we can bring it back up so you can see it. 20 A. Is that in that paper as well? 21 Q. It is. 22 A. Okay, sorry. 23 Q. It is. Well, if you're happy to take it from me -- 24 A. Yes, sure, yeah. 25 Q. -- it's mentioning £200,000 as a likely cost. 132 1 A. Apologies. I thought that was the November paper. 2 Q. No need to apologise. But just with that clarified in 3 your mind, in February 2014, do you recall discussing 4 that issue on the cost of an expert witness with Chris 5 Aujard? 6 A. No. I don't believe that was a factor in the 7 conversation at all. 8 Q. I want to look very briefly at the Mediation Scheme, 9 please. Can we turn to POL00145891. 10 So we went to this email earlier. It's between 11 Susan Crichton and you, you emailed each other in 12 August. But if we can go down please to Alice Perkins' 13 email on 31 July, one of the points she makes is: 14 "First, while it is clear that we are committed 15 using [Second Sight] for the 47 cases which are already 16 in the frame for their review, it is extremely important 17 that we cap their involvement at that. The moment they 18 are involved in additional cases beyond these, we will 19 have lost the ability to end the relationship with 20 them -- an outcome which I do not want to have to 21 contemplate." 22 Did you discuss that issue with Alice Perkins in 23 July or August 2013? 24 A. I cannot remember specifically discussing that aspect 25 with her. 133 1 Q. Well, were the Board or the NEDs at this point looking 2 for ways, as a strategy, to have Second Sight removed or 3 their involvement limited in the cases going forward? 4 A. I think the NEDs had -- and the Board, had different 5 views on the involvement of Second Sight. Personally, 6 I didn't believe that we could get rid of Second Sight. 7 Actually, I didn't want to, either. I think there was 8 a shared concern about the resource of Second Sight. So 9 Second Sight at this stage were going to -- work with 10 the Working Party to do a detailed case review for each 11 of the cases going into mediation, we didn't know how 12 many there were going to be and, at the same time, they 13 were going to continue their own report on the thematics 14 that they'd started from the interim. 15 So for two people, that was an unbelievable amount 16 of work. They'd already taken a year, which was a lot 17 longer than had been expected and, therefore, trying to 18 limit the amount of work that Second Sight did 19 absolutely was probably a shared objective. 20 I think Alice probably felt more strongly that she 21 would like the ability to end the relationship, as she 22 says. I don't think that was a shared Board view and, 23 in fact, if you come to some of the later conversations 24 in the summer of next year, again, it was -- it's clear 25 that it wasn't. The Board did not have one view on 134 1 that. There were differences of opinion. 2 Q. So with Alice Perkins who is taking a stronger view to 3 you on the use of Second Sight going forward, do you 4 recall any other Board members who shared her view? 5 A. I don't. She was working more closely with Second Sight 6 than any of the others at that stage. So when the 7 Sparrow Subcommittee came into existence, Richard and 8 Alasdair shared that work with her, and I think actually 9 they probably came over more to her point of view, but 10 I don't remember any of the others sharing her view. 11 Q. Do you have any concern as to Alice Perkins losing her 12 independence in respect of Second Sight by being 13 involved more in the -- being more involved with them? 14 A. I didn't. Alice was -- yeah, she had bags of integrity. 15 So I never doubted her integrity or her honesty or her 16 straightforwardness or her desire to do the right thing. 17 Q. Can we look, please, at POL00101325, and if we could 18 look to the bottom of that page, please, we see an email 19 from Mark Davies to a number of people on the Board. 20 You're in the distribution list, I think it's third line 21 down. It's 5 September 2014 and it refers to a BBC 22 North reporter who has clearly seen a copy of the 23 reports being the Part Two report. 24 If we go to the next email up, another email from 25 Mark Davies on 9 September, and it says: 135 1 "... a report on the leak has been broadcast within 2 the last few minutes within BBC Radio 4." 3 Then your reply is shortly afterwards on the same 4 day. 5 "As you run through this through, I wonder if you 6 could also see if there is any way that we could use 7 this leak (seriously damaging our reputation etc) to 8 stop/alter the process that we are involved in." 9 Pausing there, why was the leak seriously damaging 10 to the Post Office reputation? 11 A. Because it was incorrect. 12 Q. So are you saying the content of the Second Sight Report 13 was incorrect -- 14 A. No, sorry, so the leak. So what was reported was 15 absolutely incorrect. 16 Q. Right. So it's the -- you're referring there to what's 17 reported on Radio 4 -- 18 A. Yeah. 19 Q. -- rather than to the report itself? 20 A. Yeah, this isn't about the report; this is about the 21 leak. So the leak was reported on the radio on Radio 4, 22 and the report is inaccurate. It was just wrong. We 23 took it up with the journalist but it was damaging. So 24 the fact that we had an incorrect leak, I was, yeah via 25 annoyed by it. I didn't like that. 136 1 Q. At that point, can you recall what you thought was 2 incorrect about the report? 3 A. I cannot recall. I'm sure it's in the documents and it 4 says it just at the bottom of the screen there. 5 Q. Why did you want to stop/alter the process at that 6 point? 7 A. I think if you read the whole of it, it says it would be 8 great to find a faster, better way out of Sparrow. So 9 where are we now? September '14. At this stage, my 10 thinking had moved on and, if you go back a few months 11 to June, I think it was, the Sparrow Subcommittee had 12 come to the Board with a recommendation that, actually, 13 we bring the Mediation Scheme in-house and the Board -- 14 and let's face it, there are only three of us, me, 15 Virginia and Tim, who are not on the subcommittee -- 16 have rejected that and said no, actually, we should 17 continue with it. 18 So we did continue with it but, by the time we get 19 to the autumn, the Mediation Scheme was still incredibly 20 slow, we'd had very, very few cases go through to 21 mediation, very few cases mediated and very, very, very 22 few cases successfully mediated. 23 So clearly it wasn't working and I think everyone 24 was saying that. It wasn't just us. So Sir Alan Bates 25 was saying that, the MPs were saying that, JFSA was 137 1 saying that and Sir Anthony Hooper was saying that. So 2 I'm trying to find a better, faster way out of Sparrow. 3 So I'd already talked about a number of things. I had 4 suggested and was trying to get Second Sight put on 5 piece rate, rather than a day rate, we were 6 incentivising them to go slowly the way we were paying 7 them, incentivising them to get more people. They had 8 more than two people at this stage but two people 9 against 20 is daft. Maybe paying more. I mean, let's 10 look again at paying people more and looking to settle 11 because, clearly, the amount we your paying in mediation 12 wasn't working. 13 So we needed to find a faster, better way of 14 Sparrow. So the leak was, if we could use the leak, 15 which did annoy me. So the fact that there is a leak 16 says that the process isn't working. If the process is 17 working you wouldn't get a leak so can we use the leak 18 to find a faster, better way out of Sparrow? That's 19 what I was asking. 20 Q. So, at this point, you refer to June 2014, where you say 21 there was a proposal brought forward to -- questioning 22 whether ending the scheme. Obviously June 2014 is when 23 the Board Briefing for Deloitte is presented as well. 24 At this point, was there any discussion for the 25 potential faster or better way out to be to commission 138 1 Deloitte to do Part 2 of the work or is that still on 2 the backburner? 3 A. There wasn't any discussion about that. There was -- 4 the discussion here was about the Mediation Scheme, 5 really. So this conversation here and getting out of 6 Sparrow, it's about Mediation Scheme. So we had 7 a working party, lots of people working, individual case 8 reports. We had a mediation scheme, CEDR, but it just 9 didn't appear to me, in September '14, that the 10 Mediation Scheme was effective and, therefore, I was 11 looking for a better or faster way to get out of that 12 current -- the current way that we were doing things. 13 Open to any ideas, kicking ideas around, but just 14 keeping doing what we were doing didn't seem like 15 a sensible thing. 16 Q. Can we look, please, at POL00102370. So the email at 17 the top there is from Alwen Lyons on 10 March to you and 18 others on the Board and it's effectively setting out 19 what had happened that day from Jane MacLeod and Mark 20 Davies, and that was the day on which the Working Group 21 was terminated. You have emailed in response: 22 "That feels very well handled. 23 I'm sure it will ignite some more, but so far so 24 good." 25 If we look down at the email itself, the update, we 139 1 see the explanation of what happened and then "There has 2 been a very low-key response". Over the page, setting 3 out some response back to it including from journalists 4 and on Twitter. 5 So we can go back to page 1, please. Further up 6 please. Thank you. 7 When you say "I'm sure it will ignite some more but 8 so far so good", are you there referring to -- "ignite 9 some more" -- you're referring to press reaction? 10 A. Yes. 11 Q. In your witness statement -- we don't need to bring it 12 up but it's page 67, paragraph 178 -- you respond to 13 a question on the use of the words "very well handled", 14 and you say: 15 "The closure of the Working Group was a very 16 sensitive issue and needed to be handled carefully and 17 effectively so that the subpostmasters did not disengage 18 from the Mediation Scheme. It was common for me to give 19 praise to members of the Post Office who had executed 20 a task well, to say thank you and well done." 21 Were you, in fact, here congratulating Jane MacLeod 22 and Mark because you thought they had done a good job of 23 keeping pressure off Post Office to reverse the 24 decision? 25 A. To reverse the decision that we had made to terminate -- 140 1 Q. To terminate the Working Party? 2 A. -- the Working Party? Not at all. So most of the 3 people involved in this, Sir Alan Bates -- maybe not 4 Sir Alan Bates. Certainly JFSA, MPs, Lord Arbuthnot, 5 were basically saying "All cases should go to 6 mediation". So, for some months, we had been told, the 7 Post Office had been told, all cases should go to 8 mediation. 9 Q. Pausing there, they weren't saying all cases should go 10 to mediation and the Working Group as the independent 11 oversight should be discharged, were they? 12 A. So the Working Group had -- if all cases went to 13 mediation, there is no purpose for the Working Group. 14 So we still funded Second Sight to do the independent 15 report which would go along with the case review but the 16 Working Group had ended up being a weird thing where 17 Post Office were saying yes or no, JFSA were saying yes 18 or no, Sir Anthony Hooper was sometimes making a casting 19 vote, and people were arguing about should something go 20 into the Mediation Scheme or not, which was just a waste 21 of time and energy. 22 So you're much better off just binning the Working 23 Party and putting all cases into mediation. So I don't 24 think -- I mean, I don't know why anybody would want to 25 reverse that decision because actually we the Post 141 1 Office had been asked to do that for some months 2 beforehand by pretty much all the people involved. 3 Q. It's right, isn't it, that the Post Office had also been 4 asked to mediate cases in which there was a criminal 5 conviction -- 6 A. Yes. 7 Q. -- and Post Office's decision was not to do so -- 8 A. Yes. 9 Q. Do you not think the Working Group had a role in 10 overseeing those cases where there was a conviction that 11 had entered into the Mediation Scheme? 12 A. I'm not sure that I see the link. So we, the Post 13 Office, was under the impression that -- and we were 14 advised -- that the mediation process is not appropriate 15 for a criminal conviction and only the Court of Appeal 16 can actually overturn that. So, whilst we would go 17 through the collecting of evidence and the case review, 18 putting it into a mediation scheme wasn't advised to be 19 a sensible thing because it needed to go back to the 20 Court of Appeal in order to overturn a criminal 21 conviction and the mediation process, even under CEDR, 22 has got absolutely no authority to change a criminal 23 conviction. 24 Q. I want to briefly look at two very discrete topics in 25 respect of Shareholder Executive. The first is the role 142 1 of the Shareholder Executive Non-Executive Director. 2 Can we bring up, please, POL00021507. This is a meeting 3 of 23 May 2012, which we've been to already today but 4 could we look at page 4 this time. 5 It's Susannah Storey outlining the reasons for 6 representation of the Shareholder Executive on the 7 Board, and the last part, she says: 8 "She clarified that she would not be sharing the 9 Board papers with her colleagues in Shareholder 10 Executive." 11 Are you aware as to if anyone from Post Office had 12 asked her not to share her papers with her Shareholder 13 Executive colleagues? 14 A. Am not aware if anyone had asked her not to. I do 15 recall that there was a difference between Susannah 16 Storey and Richard Callard's time, in that -- and 17 I might have this slightly wrong, but Richard did share 18 and had a fully integrated function as being -- running 19 that department in ShEx and also being a Non-Executive 20 Director. Susannah -- and I can't remember the reason 21 for it -- there was a view that there may be a conflict 22 of interest and there Susannah was NED on the Board but 23 I'm not sure that she ran the team in ShEx, and there 24 was like a Chinese wall between them. 25 I've got to say I think that Richard -- the 143 1 situation with Richard is far better than the situation 2 with Susannah. 3 Q. Better for who? 4 A. Just better all round. Better for the shareholder, 5 better for POL. 6 Q. So where it says she clarified that she would not be 7 sharing the Board papers, you can't assist us with the 8 origin of that came from, why she felt she didn't need 9 to share her Board papers with colleagues at ShEx. 10 A. I'm guessing it's something with Alice and -- I mean, 11 I'm guessing it's coming from Alice. 12 Q. Was there any resistance on the Board to a Shareholder 13 Executive Non-Executive Director being appointed? 14 A. I do recall an early conversation with Alice where she 15 had some nervousness about it. 16 Q. Do you remember what she said about her nervousness? 17 A. I honestly cannot remember. So, in my life, I have 18 always got a shareholder on the Board and I always find 19 it useful to have a shareholder on -- so every other 20 Board I've sat on, I've got a shareholder there, and 21 I find it really useful for the shareholder to be there. 22 Every now and again, there's a conflict of interest, 23 and somebody recuses themselves but that's very, very 24 rare. 99 times out of 100, it's helpful to have the 25 shareholder represented on the board, and I do remember 144 1 having that conversation with Alice, where I think Alice 2 was okay with it. 3 Q. Just going to your experience of sitting on Boards with 4 other shareholder representatives, the way in which 5 Susannah Storey and Richard Callard fulfilled that role, 6 was that consistent with how you'd seen the shareholder 7 role fulfilled in other Boards you'd sat on? 8 A. Yes, yes. I think, inevitably, they have quite 9 a difficult tightrope to walk because the aims are 10 sometimes different. So, at the end of the day, they 11 are there looking after the shareholder interests but 12 they're also there as a director of the Board and 13 sometimes those two will diverge, but I think they both 14 perform that role reasonably well. 15 Q. I want to look at another matter, again relating to 16 a Shareholder Executive issue. In Richard Callard's 17 witness statement to the Inquiry, he referred to an away 18 day in June 2014, which he said that many members of the 19 Board felt at that away day that Paula Vennells was 20 acting more like a Non-Executive Director than a case. 21 Did you share that view and do you recall that away day? 22 A. I did share that view. I do vaguely recall the away 23 day. There is a fairly long history to Paula, which is 24 not desperately satisfactory, and Paula's performance, 25 which I touched on this morning -- her performance 145 1 changed over time and our view of her performance 2 changed over time. But, certainly, in 2014, her 3 performance was not great. In fact, probably towards 4 the end of '13 and '14 her performance was not great 5 and, as you will be aware, we did conduct an exercise 6 with a firm of headhunters to market, map and understand 7 alternatives. 8 Q. Your concerns, to what extent -- sorry, I'll repeat 9 that. 10 Your concerns with Paula Vennells, to what extent 11 did they relate to her handling of matters such as the 12 Second Sight Review and complaints as to Horizon's 13 integrity? 14 A. They were not the main area of concern. 15 Q. Was it an area of concern? 16 A. Not that I can recall. I don't recall her handling of 17 Horizon being an issue. She was very heavily involved 18 in Horizon. She and Alice spent a lot of time, a lot of 19 energy involved in Horizon. Arguably, you know, Paula 20 didn't spend enough time on other things. Now, clearly 21 with hindsight, that's wrong, and she didn't spent even 22 enough time with Horizon or do the right things. But 23 the criticism of her wasn't specifically about Horizon; 24 it was really about the leadership of her team, the 25 management of the business, the lack of commerciality, 146 1 the strategy aspects. 2 Q. I want to briefly deal with one matter which is way, way 3 ahead in the chronology. In fact, it's after the 4 Horizon Issues trial, and it's communications you had 5 with Paula Vennells in 2020. Please can we bring up 6 PVEN00000362. If we could go to the second page, 7 please. You see these are text messages provided by 8 Paula Vennells, they're marked as being an exchange with 9 you on 3 March. Do you recognise these as being texts 10 that you sent to her and received from her. 11 A. Yes. 12 Q. You say -- did you say something, sorry? No. 13 You say: 14 "Good morning Paula. 15 "Just to let you know I am a tad early and in 16 Paddington ..." 17 So you're referring to a meeting you're about to 18 have with her. Do you remember the purpose of meeting 19 with her on 3 March 2020? 20 A. Yes, so this is an extract from a slightly longer chain 21 of text messages, which I'm not sure if you have or not. 22 The earlier ones I looked at on my phone, whilst I'd got 23 these, I'd forgotten these. Basically Paula texted me 24 to say she'd just had a coffee with Alice, she's trying 25 to remember and catch up on things regarding Post 147 1 Office. Would I have a cup of coffee with her, please. 2 So I said "Yeah, I left Post Office a long time ago. My 3 memory of Post Office is poor, I haven't got paperwork. 4 So I'm really not going to be much use to you, but I'm 5 happy to have a coffee". So we had a coffee. 6 Q. We see the text there around 11.13/11.15, later on in 7 the evening, it says from Paula: 8 "Lovely to see you -- thanks for your wisdom, 9 memory, time and coffee! Will keep you posted." 10 Do you remember what topics you discussed with Paula 11 Vennells at that meeting? 12 A. So Paula was asking me for my recollections of Post 13 Office and, honestly, I had very few recollections of 14 Post Office and I don't think that I told her anything 15 that she didn't already know way more than I did, and 16 that lasted maybe ten minutes, and then it morphed into 17 a conversation about her because she was not in good 18 form. 19 Q. Just pausing there, I'm only going to explore with you 20 matters that are relevant to the evidence of the 21 Inquiry. I don't want to pry into anything further. In 22 that ten-minute conversation can you recall any specific 23 topics that she asked you about in particular, regarding 24 Post Office? 25 A. The Second Sight investigation, the Mediation Scheme, 148 1 Business Improvement Programme, Working Party. I think 2 the only thing I can remember is Second Sight and the 3 spin-offs from that. I don't think there was 4 a conversation about prosecutions. So I think it was 5 Second Sight, mediation, Working Party. 6 Q. Can we look, please, at PVEN00000015. So if we go to 7 the bottom of that page, please, we've got an email 8 about a week later on 15 March. It says: 9 "Hi Paula, 10 "Forgive me for being paranoid with the email 11 address! 12 "All very well here thank you ..." 13 "I had looked before and found nothing. I stumbled 14 across these two bits that I just seem to have neglected 15 to throw out. They may be of some small use -- if only 16 to jog your memory of the players involved." 17 What request were you responding to here? 18 A. Paula had asked if I had any paperwork regarding, say, 19 the things that she had been asking about: Second Sight, 20 Mediation Scheme, Working Party. 21 Q. Thank you. That can come down. 22 I have two final broad questions on reflections. 23 We've gone in detail about the Board oversight of IT and 24 prosecutions from 2012 onwards, really. To what extent 25 do you think the Board would have been assisted if it 149 1 had a Non-Executive Director with a specialist expertise 2 in IT? 3 A. I think that it would have been very useful to have 4 somebody with IT expertise on the Board and I also think 5 it would have been very useful for us to have -- 6 arguably more useful for us to have somebody with legal 7 experience on the Board. 8 I have heard a lot of my peers, colleagues, 9 ex-colleagues, say that they thought the Board -- or 10 agree that the Board wasn't curious enough and, 11 actually, I personally don't agree with that. So if 12 I think about the Board, the Board was very curious. It 13 was quite combative, it was quite challenging. 14 Horizon issues aside, we were a very, very busy 15 Board dealing with some very difficult problems and we 16 made very good headway on many of those things and we 17 did that in quite a challenging environment. So the 18 whole environment was quite challenging. 19 With Horizon issues, I think partly because nobody 20 on the Board had good IT or good legal skills -- and 21 I'll perfectly happily admit I don't have good IT or 22 good legal skills, that wasn't why I was recruited -- 23 I think the level of challenge probably wasn't good 24 enough. But, to me, the much bigger issue is that the 25 flow of information which came to the Board was flawed, 150 1 and there was some very important pieces of information 2 which were just missing and totally airbrushed, and 3 there were other pieces of information which were 4 massaged in a way that we didn't pick up on. 5 Q. The absence of IT and legal expertise on the Board -- 6 I say that in particular for non-execs -- was that 7 something you considered at the time as being something 8 that was absent? 9 A. We did, when we were thinking about the Nominations 10 Committee, we did -- and I think it's there in one of 11 the Nominations Committee reports -- we did say that 12 when the Board was refreshed, we should try to refresh 13 it with somebody with IT skills. So I don't think we 14 thought of it a screaming need but we did think of it as 15 it would be helpful to have somebody with good IT 16 skills. Again, the benefit of hindsight is probably -- 17 that would have been much more helpful at the time. 18 I think at the time we thought that we had found 19 what needed to be found and needed to be fixed, and we 20 were not as aware of the prosecutorial misfunction as 21 maybe we should have been. 22 MR STEVENS: Sir, those are the questions I have. Unless 23 you have any questions, I know there are some from Core 24 Participants. 25 I think is it ten minutes? 15? 151 1 Sorry, sir, I'm just taking time -- oh. 2 You're on mute, sir, sorry. We'll take a break -- 3 SIR WYN WILLIAMS: I've been unmuted but, for the last 4 30 seconds to a minute I've heard everything but I've 5 lost the video, if you see what I mean. 6 MR STEVENS: I see, sir. 7 SIR WYN WILLIAMS: So yes, if we take ten minutes and then 8 that can be put right. 9 MR STEVENS: Of course, yes. 10 We can hear you now, sir, sorry if I was speaking 11 over to you and noticing. 12 SIR WYN WILLIAMS: No, it's fine, I wasn't able to unmute 13 myself but I had some remote assistance for that so I'd 14 now like some remote assistance to resume looking at you 15 all. 16 MR STEVENS: Thank you, sir. We'll arrange that, sir. So 17 if we come back at, shall we say, 3.55, sir. 18 SIR WYN WILLIAMS: Mm-hm. 19 MR STEVENS: Thank you. 20 (3.43 pm) 21 (A short break) 22 (3.55 pm) 23 MR STEVENS: Sir, this usually a formality but hopefully you 24 can hear and see us this time? 25 SIR WYN WILLIAMS: Yes, I can, thank you. 152 1 MR STEVENS: Only one set of questions from Mr Jacobs who 2 has ten to 15 minutes, I think. 3 SIR WYN WILLIAMS: Right, fine. 4 Questioned by MR JACOBS 5 MR JACOBS: Mr McCausland, good afternoon, I represent 6 a large number of subpostmasters and subpostmistresses 7 who are affected by this scandal and are Core 8 Participants in this Inquiry and I'm instructed by 9 Howe+Co. 10 I want to ask you about two things, hopefully quite 11 briefly: the first topic is bugs in the Horizon system 12 and the second topic is the Post Office Advisory 13 Council. 14 In relation to bugs in the system you gave evidence 15 this morning and you referred to a discussion with Susan 16 Crichton that you were present at, and you said -- and 17 I'm just reading from the [draft] transcript, so correct 18 me if I'm wrong -- Susan Crichton informed you that in 19 all previous prosecutions where Horizon data had been 20 used we -- that's the Post Office -- had been 21 successful. You said: 22 "I was talking to an experienced RMG director", who 23 I think its Les Owen, is that right? 24 A. Yes. 25 Q. He was talking to your General Counsel and there was 153 1 a very clear and a very robust answer from Susan 2 Crichton that the system was sound. That was your 3 understanding, yes? 4 A. Yes. 5 Q. Had you been told, at that stage, that there were no 6 bugs in the Horizon system? 7 A. I had not been explicitly told anything about bugs at 8 that stage, so this was very early in 2012, the January 9 Board meeting, I think, in 2012 and nowhere in my 10 induction or in the Royal Mail Group handover had there 11 been a conversation about bugs. 12 Q. Right. Would it be fair to say that, as a result of 13 your conversation or the conversation that you were 14 involved in with Ms Crichton and Mr Owen, that it was 15 your understanding or it was the general understanding 16 of you and others on the Board that the Horizon system 17 was working perfectly and that there were no bugs in the 18 system? 19 A. Yes. I took comfort from the fact that the General 20 Counsel was being very clear and very unequivocal with 21 an experienced Royal Mail Group, as Les was Royal Mail 22 Group and had been on the RMG Board for some time, and 23 I took comfort from that. 24 I wasn't really involved in the discussion at that 25 stage, if I'm honest, I was listening but I definitely 154 1 took comfort from that exchange, where Susan was very 2 clear we had won on previous prosecutions, the audit 3 report was very positive, it had been reviewed by 4 Deloitte, and the legal claims which I had not seen, 5 from Access Legal, were weak. So, yes, I took strong 6 comfort from that. 7 Q. That was the message you were getting from Post Office, 8 wasn't it? 9 A. Yes. 10 Q. So if we can move forward in time a little bit to 8 July 11 2013, which was the release of the Second Sight Interim 12 Report. 13 A. Yes. 14 Q. Again, taking you back to your evidence this morning, 15 you said that you were unhappy that you were not kept 16 properly informed about the progress of the Interim 17 Report. 18 A. Yes. 19 Q. You said: 20 "We had asked the Board several times over the year 21 how are Second Sight getting on. So to have it dropped 22 on us, not in a written communication, not at a proper 23 Board meeting, with proper papers, but just to have it 24 thrown in as an AOB to say [and I'm quoting you] 25 actually, Second Sight Report is coming out next week 155 1 and we're not happy with it because it's inaccurate and, 2 by the way, there are bugs and flaws." 3 That's how it landed on you, effectively? 4 A. Yes. 5 Q. So we've gone, haven't we, from you having 6 an understanding that there are no bugs in the system, 7 everything is working perfectly, to a report from 8 forensic experts which said that there are defects in 9 Horizon Online, that it impacted 76 branches. The 10 receipts and payments mismatch problem affected 62 11 branches and the local suspense account problem affected 12 14 branches. So we've gone from one quite extreme 13 position to another quite worrying position, haven't we? 14 A. We've gone from a very confident position to a less 15 confident position but, at that stage, it wasn't 16 a particularly worrying -- 17 Q. Yes, and I remember you said that it should have been 18 a red flag but it was probably an amber flag, is I think 19 what you said this morning? 20 A. That probably is right. 21 Q. Yes. So do you think that the Board, when presented 22 with a serious change of information about the Horizon 23 system, should have requested more information from IT 24 managers in POL, or even from Fujitsu, at that point 25 when you got that report? 156 1 A. So when -- if I try to remember back to that time, when 2 I got the report and read the report from Second Sight, 3 and coupled with that had Paula's briefings verbally and 4 in writing, the two were -- the two issues were somewhat 5 separated in my mind. So neither Second Sight nor Paula 6 were saying that the bugs and the issues that we were 7 trying to find through Second Sight, ie the 8 subpostmaster losses, how have they arisen, what is 9 happening to them, follow the money. 10 Those two issues were separate and they were 11 separate when Paula was describing them. She was very 12 clearly articulating it verbally and in writing that 13 these bugs were not linked to the Second Sight cases. 14 And, in the Second Sight report, they were also 15 separate. Second Sight were clearly saying there are no 16 systemic problems with Horizon and there are two bugs 17 that have been found but they weren't saying these bugs 18 have caused this problem. 19 So, with hindsight, wrongly, but at the time, both 20 Second Sight and Paula led me to believe that the bugs 21 were actually not the issue that we were grappling with 22 here. 23 Q. I think the essence of the question that I ask you on 24 behalf of our clients is: was this not is an opportunity 25 for the Board to get more information about why Post 157 1 Office had been saying one thing and Second Sight were 2 saying something slightly different? Wasn't there 3 a case to consider whether the Board were being misled 4 by Post Office at this time? 5 A. I don't think Second Sight were saying something 6 different to the Post Office. So Second Sight and the 7 Post Office were both saying the same thing, which was 8 that they had found these bugs but they weren't -- they 9 weren't the same bugs or they weren't the problem which 10 we were looking for in the Second Sight Report. So the 11 Second Sight Report I read as saying there are definite 12 problems here, you need to fix these things -- I've been 13 through them again -- before, I won't repeat them -- and 14 that is what they were saying. 15 They weren't saying, "You've got two bugs here, 16 that's what you need to be looking for, boys". The 17 Second Sight Report -- I wish with hindsight that the 18 Second Sight Report had said, "First of all you've got 19 big prosecutorial problems", which I watched the 20 evidence from Ian and Ron and they say they said that to 21 Susan, nothing about that in the report, and I wish that 22 they'd said, "You've got bugs here", and also, you know, 23 "I have been speaking to Gareth Jenkins and he tells me 24 this". 25 So all of that stuff, I wish that had been in Second 158 1 Sight's Report or Second Sight had come to the Board and 2 said that but that -- I read Second Sight's report and 3 I didn't -- and even if I read it now, I still -- it 4 doesn't come out at me as saying these bugs are the 5 problem -- 6 Q. All right. 7 A. -- which is I think why we didn't take the action that 8 I wish we had taken. 9 Q. So just -- and I'll move on after this, I think I have 10 your answer but I think that your answer is the fact 11 that Post Office were originally telling you there are 12 no bugs, and that Second Sight, in an Interim Report, 13 said there are bugs that affected 76 branches, you 14 didn't think at that point that someone in Post Office 15 was misleading the Board, which, of course, now we know 16 to be the case? 17 A. Correct. 18 Q. I'll move on, and I'm going to ask you about 19 paragraph 34 of your statement, and if we could just 20 maybe call that up, it's WITN10290100. It's page 14 of 21 83. We'll just wait for that to load on the screen. So 22 paragraph 34, please. Thank you. 23 We can't see a paragraph 33, but the headline is 24 "Post Office Advisory Counsel ('POAC')". What you say 25 at the bottom, so we can see about eight lines down, 159 1 "I was a member of this committee", five lines from the 2 bottom: 3 "I was a member of this committee alongside Tim 4 Franklin, who acted as Chairman." 5 Then you say: 6 "POAC was established in 2014 ..." 7 Well: 8 "The idea behind POAC was to enable the Company to 9 better hear the views of SPMs and customers and to try 10 and improve engagement and workplace culture. I was 11 a member of this alongside Tim Franklin who acted as 12 chairman. POAC was established in 2014 and was set up 13 to help create a pathway to mutualisation, where all the 14 stakeholders -- [Post Office] employees, 15 [subpostmasters], customers and wider stakeholders -- 16 worked collaboratively to improve the company for the 17 good of all." 18 Yes? 19 You've relied in your statement on the POAC terms of 20 reference. If we could maybe move to that document, 21 which is POL00228475. 22 We'll just wait for that to come up on the screen. 23 So we can see the purpose of the committee was to: 24 "... provide a forum for Post Office stakeholders 25 and other experts [this is reading from the top] to 160 1 discuss issues of interest and importance that impact on 2 customers, stakeholders and their communities." 3 Now, a stakeholder is an SPM, that's right, isn't 4 it? 5 A. Yes, amongst others. 6 Q. The role of the Council, and you can see the bullet 7 points under "Role", was to: 8 "... provide a two-way channel of communications 9 between Post Office and its stakeholders [so 10 subpostmasters in the post office would be included in 11 that] 12 "provide a mechanism for stakeholders and experts to 13 offer views and advice to Post Office Board and the 14 Group Executive on subjects brought to it 15 "increase understanding and strengthen relationships 16 between Post Office, its stakeholders and wider interest 17 groups 18 "provide a community for advocacy and communication 19 of Post Office issues." 20 Do you think that this is a potential vehicle that 21 could have dealt with subpostmaster issues with the 22 Horizon system? It certainly sounds that way. 23 A. I'm not sure that it could, to be honest. So the 24 culture of the Post Office was not good, particularly at 25 the beginning. It was very "Head Office is God and 161 1 everyone else is not good". It didn't talk about 2 a customer at all. It was arrogant. There was a blame 3 and defensive culture. So, throughout my time there, we 4 tried hard to shift the culture into something frankly 5 more normal. There was, again, throughout my time, 6 a plan -- I wouldn't call it any more than that but 7 a plan -- to prepare the company to one day become 8 a mutual. 9 It was totally impossible at the beginning because 10 there were conditions -- yeah, you would need to be 11 financially sustainable to become a mutual and that was 12 nowhere near. But the Government quite liked the idea 13 of a mutual. Tim and I very much liked the idea of it 14 being a mutual and, therefore, we took number of steps 15 to try to change the culture, to try to engage more with 16 the subpostmasters, so we forced part of Paula's bonus 17 to be on subpostmaster engagement. We developed a lot 18 of engagement mechanisms, just communication. So lots 19 more communication with the subpostmasters, and huge 20 amounts more listening from them. 21 So the POAC was designed, really, just as one of the 22 strands in that, where we would get together a group of 23 people, subpostmasters, but a lot of customers as well, 24 industry people -- so people like Google were on it -- 25 just as a way of opening up the culture, listening, 162 1 debating, having different views. 2 I think to grapple with the Horizon issues, Horizon 3 issues inevitably are very technical, and I think you 4 really needed a group of specialists with a lot of time 5 to do that. And the people on the POAC were giving 6 their time but they were giving limited amounts of time 7 because they all have jobs elsewhere. So to expect them 8 to really, you know, dive into something which wasn't 9 their specialist subject, I'm not sure that the POAC 10 would have been a great vehicle to tackle the Horizon 11 issues. 12 Q. In light of what you say in your statement, though, 13 where you say that it was to help stakeholders, which 14 include subpostmasters, to work collaboratively to 15 improve the company for the good of all, you've said 16 that there were subpostmasters who were members of the 17 POAC; is that right? 18 A. I believe so. 19 Q. Were they subpostmasters who had knowledge of the 20 Horizon issue, do you recall? 21 A. So I don't recall -- knowledge of Horizon, absolutely, 22 users of Horizon. Of the Horizon issue, I don't 23 remember any conversation at a POAC regarding the issues 24 that are being talked about in this Inquiry. 25 Q. There was a provision to invite people to the meetings? 163 1 A. Yes. 2 Q. And also the Committee fed back to the Board and the 3 Board fed back to the Committee; that's right, isn't it? 4 A. Yes. 5 Q. Because Post Office knew what the issues were with the 6 subpostmasters and Horizon issues, did anyone ever 7 suggest inviting people like Lord Arbuthnot or 8 individual subpostmasters who had grievances to talk to 9 the Committee to try to resolve the issues at that 10 level? If someone had said, for example -- doesn't have 11 to be a technical point -- but "I can see the cursor is 12 moving on the screen, someone is in my system. I think 13 there have been miscarriages of justice, all my uncles 14 and aunts have been prosecuted, they've done nothing 15 wrong", that sort of thing might have been able to cut 16 through the culture of the Post Office; do you agree? 17 A. I understand what you're saying but I'm not sure that 18 I agree. So the agenda for the POAC was formed by the 19 members. So the members of the POAC would say what they 20 wanted to talk about and Tim, as Chair, would basically 21 agree. So, I mean, Tim is the nicest, most 22 collaborative man in the world and Tim would broadly 23 shape the agenda based on what the members wanted to 24 talk about. And those things tended to be more the 25 strategy for the Post Office, where we were going with 164 1 Financial Services, why don't we do more for an energy 2 and telecom offer? How can we get better at listening? 3 Network Transformation was an issue. 4 So the agenda came from the members, which is what 5 we were trying to do. I wish that we had had more 6 direct contact as a Board so, again, I'm not sure the 7 Post Office Advisory Committee is the right place for 8 that but, as a Board, I absolutely wish that Lord 9 Arbuthnot and Second Sight and subpostmasters had come 10 to the Board and, you know, we had had more direct 11 contact in that way because, I mean, I have said it 12 several times but I'll stress it again: the NEDs on the 13 Board were not trying to cover up, were not trying to 14 shy away from problems. We were actively tying to find 15 problems and we thought we had found some of the 16 problems, and we thought we tried to fix some of those 17 problem. 18 We clearly didn't and, actually, the one thing that 19 I think might have helped to unlock that and to change 20 what we were doing, was direct contact with JFSA, 21 Sir Alan Bates, Lord Arbuthnot, subpostmasters, and 22 I regret that that didn't happen. 23 MR JACOBS: I think I have probably asked all my questions. 24 I'm just going to see if there is anything else that 25 Howe+Co and Mr Stein would like me to ask you? 165 1 No, that's all. That's been helpful. I'm grateful, 2 thank you. 3 SIR WYN WILLIAMS: So that's it, is it, Mr Stevens? 4 MR STEVENS: Yes, sir. 5 SIR WYN WILLIAMS: Well, thank you very much, Mr McCausland, 6 for making your witness statement, answering very many 7 questions during the course of the day, being 8 interrupted by a fire alarm and momentarily going off my 9 screen. But, nonetheless, we got through the day, and 10 I'm very grateful for your evidence. 11 THE WITNESS: Thank you, sir. 12 SIR WYN WILLIAMS: Right. Tomorrow morning, can we make it 13 10.00, Mr Stevens, so that my train doesn't maroon me 14 and make you all late? 15 MR STEVENS: Yes, of course, sir. 16 SIR WYN WILLIAMS: Fine. 17 MR STEVENS: Thank you, sir. 18 (4.15 pm) 19 (The hearing adjourned until 10.00 am the following day) 20 21 22 23 24 25 166 I N D E X NEIL WILLIAM MCCAUSLAND (sworn) ...............1 Questioned by MR STEVENS ......................1 Questioned by MR JACOBS .....................153 167