This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
| 5 minutes read

Where were the Directors? Part 3

As a lawyer by trade - although I am enjoying my foray into journalism - today I am thinking about the objective and statutory duties of those on the Board of the Post Office, as legislated under the Companies Act 2006. By staying silent in the face of wrongdoing on an industrial scale, did the individual members of the Board breach their duties as directors?

The Companies Act sets out seven director’s duties, breach of which can result in removal from office, a fine, or even a criminal conviction. The duty to exercise reasonable care, skill and diligence is at the forefront of my mind when it comes to the Post Office scandal, and by that I mean the lack thereof. Directors are held to a standard of reasonable diligence, considering their knowledge, skill and experience. To act diligently involves directors keeping themselves informed about the company’s affairs. I think we can all agree that there seems to have been a collective case of looking the other way when it comes to the Board of the Post Office. Either that, or a simple unwillingness to intervene. 

The case of Sharp v Blank states that the question of whether directors are compliant with this duty is whether the decision in question falls outside the range of decisions reasonably available to the directors at the time. To my eye, the decision to accuse over 900 sub-postmasters of numerous crimes would, at one point or another, have come across the desks of the directors. 

Another core duty of every director is to promote the success of the company for the benefit of its members as a whole. Being technical for a moment here, the legislation denotes that under this duty, a director must consider ‘the likely consequences of any decision in the long term’ and ‘the desirability of the company maintaining a reputation for high standards of business conduct’. From a purely practical perspective, which is hard to stand behind considering the emotional and human tragedy of this scandal, I think it is fair to say that the Post Office’s reputation is, to put it mildly, in tatters. I also believe that this fall from grace is a direct consequence of the detrimental decisions made by the Post Office’s Board for a period of over 20 years. There is also a tragic irony here: so many of their shocking decisions were made with a view to protecting the previous good name of what once was a treasured institutional brand. Where have those ‘high standards of business conduct’' gone?

Of equal importance to address when considering these technicalities, is the fact the Post Office is a public corporation. Therefore, its directors must promote the success of the company for the benefit of the public, meaning you and I. It is abundantly clear that, along with the life changing impact that this scandal has had on the individual sub-post masters, sub-post mistresses and families who were directly affected, the Post Office has miserably and squarely failed in its duty to the public. Not least, the Post Office has cost the taxpayer hundreds of millions of pounds in racking up legal fees, wrongfully prosecuting individuals using flawed evidence and then attempting to defend the indefensible.  

It is also worth noting that well-funded parties such as the Post Office typically tend to instruct the most expensive law firms, in order to outspend their opponents with a view to securing a favourable outcome. In their ruthless defence of the group action brought by the 555 sub-postmasters led by Alan Bates, this is exactly what came to pass. The Post Office’s solicitors litigated in the most aggressive way possible resulting in the sub-postmasters having to settle for an average pay-out of a measly £20,000 per head because after so many years of litigation and seemingly many more yet to come, their litigation funder could no longer fund. 

This begs the question, was it to our benefit for the Post Office to spend these eye-watering sums to prolong what has probably been the most widespread miscarriage of justice in British legal history? 

Interestingly, I had a read through the Post Office’s Social Purpose agenda this morning, which sets out its principles. 

Among those principles, it promises to ‘build relationships based on trust’, ‘treat everyone with fairness and honesty’, and ‘make a positive social and economic contribution to all the communities in which we work’. I should think that protecting and promoting a company’s core principles comes under the umbrella of promoting the success of the company. In that respect, the Board of the Post Office has, in my opinion, failed miserably. With more than 900 sub-post masters being wrongfully accused of criminality, the principles of the Post Office have come crumbling down, and with them, the integrity of those who sat by and watched them fall.  

Conversely, and at the same time as the scandal was unfolding and Horizon issues being systematically ignored and/or covered up, the Board wasn’t quite so careless or without an eye to detail when it came to its own executive directors’ remuneration. There is no better example than one that I have already commented on, the painful sub-scandal that has been dubbed ‘Bonus-gate’:

 https://www.linkedin.com/posts/simonmgoldberg_post-office-boss-to-return-bonus-after-horizon-activity-7100243802262519808-72u8/?utm_source=share&utm_medium=member_android.

This unhappy episode brought to light the incredible detail, board scrutiny, establishment of committees, and assessment of performance metrics that were all part and parcel (no pun intended) of the decision-making process behind calculating their own executives' bonuses. Would that they had applied anything like a similar sense of rigour when it came to considering prosecutions and dealing with the by then very serious issues with Horizon that had come to light. No such luck.

Putting specifics aside, the undercurrent of these duties is fiduciary in nature, meaning it is a relationship of trust. While silence in the face of wrongdoing may not constitute an explicit breach,  directors are placed in a position of custodial power within a company. If the people in power can’t keep a company in check, what hope was there in ever protecting the sub-postmasters? Presumably,  this never even crossed the minds of members of the Board.

There are and have been lawyers, CEOs, and people at the top of the financial services industry sitting on the Post Office Board. Taking a moment to think about the wealth of knowledge and expertise of the people involved, it leaves me completely dumbfounded as to how no one on the Board spoke up to protect the sub-postmasters or the public’s confidence in this national institution. 

This short article can’t do justice to what is a complex legal topic but I can recommend the article by Karl West of the Institute of Directors: https://www.iod.com/resources/blog/governance/the-post-office-horizon-scandal-lessons-for-directors/ citing the detailed and excellent work of Nick Gould,  https://www.linkedin.com/in/nicksbgould/,  and has been widely circulated and read.

Thanks also to my colleagues Molly Nathan and Tatiana Hepher for their input.

 

 

 

Tags

corporate commercial & finance, crime & regulatory, dispute resolution, media & communications disputes