Post Office (Horizon System) Compensation Act 2024

Policy background

Context

3. In 2000 the Post Office introduced new Horizon software to its network of branches. The software had faults which meant that some postmasters’ accounts showed false shortfalls. The Post Office obliged postmasters to "repay" these false shortfalls. Some postmasters were suspended (generally without pay) and/or dismissed. Others were prosecuted (by the Post Office itself or by others); some were convicted and imprisoned. Some were made bankrupt (in some cases on the petition of the Post Office: there are allegations that this was done maliciously). Some lost their homes. Some suffered mental or physical health problems as a result of their treatment or of the financial consequences. Some were harried as thieves by their local communities. Some suffered breakdowns in relationships with their partners, children or other families and friends. Several died by suicide.
4. Following various failed attempts to expose the scandal, in 2016 a group of 555 people (mostly postmasters (individuals or companies) but also some managers, Post Office staff and employees of postmasters) took the Post Office to the High Court in a case managed pursuant to a Group Litigation Order made in March 2017. This legal action culminated in two major judgments (on Common Issues and Horizon Issues ) which were very critical of the Post Office’s software, its contracts with postmasters and its general behaviour.
5. As well as finding that the postmasters were not liable for the shortfalls, the High Court made several important findings in respect of the postmasters’ contracts. In particular, the Court found that:
   • The contract between the Post Office and the SPMs was relational. This imposed an implied duty of good faith on both parties.
   • The terms of the contract were subject to the requirement of reasonableness imposed by the Unfair Contract Terms Act 1977; and that a number of the terms which the Post Office had imposed failed to satisfy that test, including the withholding of postmasters’ renumeration during any period of suspension prior to March 2019.

6. In December 2019, in the light of the High Court judgments, the Post Office settled out of court for £42.5 million plus costs ("the GLO settlement agreement"). The postmasters had to pay around £31 million of this sum to the company which had funded their action, leaving them with meagre compensation. They divided this amongst themselves using a formula set by the group’s steering committee with the help of their legal advisors.
7. The GLO settlement agreement also provided for the Post Office to create a compensation scheme for those postmasters who had not been parties to the GLO legal action. This was implemented as the Historic Shortfall Scheme (HSS), now renamed the Horizon Shortfall Scheme. 1
8. The Government subsequently announced the launch of a judicial inquiry into the scandal, which was upgraded to a statutory inquiry in June 2021. This is being chaired by Sir Wyn Williams. The Inquiry’s scope is defined by the Terms of Reference 2 set by the Secretary of State. Within that, the Inquiry has published a List of Issues 3 on which it is focusing.
9. In April 2021 the Court of Appeal overturned the convictions of 39 postmasters whose cases had been referred by the Criminal Cases Review Commission (CCRC) 4 . Further convictions have since been overturned, taking the total to 95. These individuals – whether or not they were members of the GLO – are compensated through separate arrangements. (The GLO settlement agreement included a special provision to permit this).
10. The effect of this was that – paradoxically – the unconvicted members of the GLO group were left as the least generously compensated postmasters affected by the scandal. The Government announced 5 in March 2022 that it would run a compensation scheme ("the GLO Scheme") to provide these people with compensation on a similar basis to other postmasters.
11. The terms of the GLO Scheme are set out in Guidance and Principles 6 published by the Department for Business and Trade ("DBT").
12. As previously mentioned, the Common Issues judgment found that clauses in Postmaster contracts allowing the Post Office to withhold remuneration during any period of suspension were unreasonable under the Unfair Contract Terms Act and, consequently unlawful, so that it was not entitled to rely on them.
13. In 2022 the Post Office announced 7 the Suspension Remuneration Review with an intention of offering redress for current postmasters affected by Post Office’s previous suspension remuneration policy. This policy meant that prior to March 2019, postmasters who were suspended did not receive any renumeration during the period they were suspended. This policy was subsequently changed in March 2019, necessitating the payment to eligible postmasters who were suspended before the change of policy of retrospective remuneration to cover the period of suspension.
14. The Government announced 8 in November 2022 that it would provide funding to cover compensation to postmasters for unpaid suspension remuneration and any associated consequential losses, although the scheme would be administered by the Post Office. The terms of the Suspension Remuneration Review are set out in the questions and answers document 9 published by the Post Office.

Outline of the Act

15. The Act contains only two Sections. The first provides a power to incur expenditure; the second specifies its short title.