Post Office Counters Ltd v Mahida

LADY JUSTICE HALE: This is the defendant's appeal against the order of His Honour Judge Parry made on 31st October 2002 in the High Wycombe County Court sitting in Staines. He gave judgment for the claimant Post Office on its claim against the defendant, who is a former sub- postmistress, for the sum of £4,341.83 plus interest.

The defendant was appointed sub- postmistress at the Lane End Post Office, High Wycombe in October 1988 under a contract for services. This contract made her responsible for all losses caused through her own negligence, carelessness or error and also for losses of all kinds incurred by her assistants. Such losses had to be made good without delay, and the liability did not cease when the engagement ceased.

The defendant was suspended on 20th October 1994. On that date she was interviewed by a Mr Williams from the Post Office's Investigations Branch about discrepancies in her claims for payments in respect of DSS benefits which had been paid out in her Post Office. Disciplinary procedures followed and her contract was terminated at the end of January 1995.

In September 1997, nearly three years after her suspension, the Post Office brought these proceedings to recover an alleged deficiency of £4,341.83. The defendant denied this and counterclaimed for breach of contract. The matter did not come on for trial until October 2002. The judge found the claim proved and dismissed the counterclaim.

Carnwath LJ gave permission to appeal on two issues: firstly, whether the claimant had adequately proved the loss claimed and, secondly, whether a fair trial of the issue was possible in view of the lapse of time and the destruction of many of the underlying documents.

At the time of the trial the defendant was acting in person. Today she, and we, have had the benefit of Mr Julian Kenny, who has appeared Pro Bono on her behalf. The court is most grateful to him for the representations that he has made. He has presented the arguments on behalf of the appellant, in my view, as well as they could possibly have been presented. He makes no separate point on delay as such, but he does rely very heavily on the effect of the destruction of the underlying documents on the fairness of the trial.

The loss eventually pleaded in further and better particulars, which were dated 16th April 1999, consisted of four items. The first related to a Giro Bank deposit of £90.52 which was accepted by the defendant's office but not accounted for to the claimant. The second was for £300, received in respect of motor vehicle licences issued, which was not accounted for. The fourth was a failure to account for a saving bank deposit of £65.00 recorded in a customer's bank book. No real point is taken on those three items.

The important item is that listed third in the further and better particulars, "pension and allowance payments - various errors ... between 22nd April 1992 and 20th October 1994". These related to social security benefits paid out by the defendant's Post Office. The Post Office would pay out benefits in cash in return for the customer's docket or foil. Those dockets or foils would be batched up and sent to the Department of Social Security, as it then was, in Northern Ireland. They would be collected and sent in a special pouch each week together with the "add list, " a sort of till roll which listed them all and added them up, and a summary form, which effectively claimed reimbursement. This reimbursement was routed from the DSS to the Post Office and back to the sub Post Office.

It was the DSS's practice to carry out spot checks and, if suspicions arose, matters would be passed on to conduct more regular checks. It is clear that regular checks were being made on the defendant's Post Office for a long period before she knew anything about it, that period being represented by the schedules which were in evidence before the judge. Those schedules were three in number. Schedule A was compiled in Northern Ireland and relates to weekly pouches from the week ended 29th April 1992 to the week ended 6th July 1994, but there is a gap between March 1993 and early July 1993. That is because, by that stage, matters had been reported by the DSS to the Post Office. The Post Office Investigations Branch was brought in and Mr Williams intercepted the pouches and conducted his own checks, which are recorded in Schedule B, from the week ending 17th March 1993 until the week ending 23rd June 1993. There is a third schedule, Schedule C, again compiled by the DSS, which relates to the period from the week ended the 13th July 1994 until the week ended 19th October 1994, when, of course, the balloon went up. Those schedules are, of course, a summary of the discrepancies found between the add lists and the summary forms submitted and the underlying dockets or foils to support those lists and claims. Most of the discrepancies amount to there being missing dockets or foils. In other words, a claim may be put in for, say, five benefit payments, but only three documents or foils were contained in the pouch. Others of the discrepancies are recording the wrong sums against particular benefit payments.

The problem for the court and for everyone else is that none of the original documentation, that is the dockets and foils, add lists and claim forms, is now available for anyone else to check. The evidence from the Northern Ireland DSS office was that they routinely destroy the original documentation after a year, and that may therefore relate to most of the documentation in Schedule C. It is clear that Mr Williams had the original documentation to support his Schedule B and had some, if not all, of the original documentation to support Schedule A, because items from it are referred to in the interview which took place on 20th October 1994. His evidence is that all the original documentation in his possession had been destroyed after a period of time. There is no further information as to how, when or why it went missing. We are told that it was assumed that it had been destroyed because when it was looked for the Post Office could not find it.

The judge nevertheless felt able to rely on the schedules, together with the evidence of Miss Cassidy from the Northern Ireland DSS, who produced their schedules and had indeed checked personally some of the figures listed, and from Mr Williams, who had, of course, produced Schedule B; and he felt able to rely on that secondary evidence of the amount of the loss together with the totality of the evidence, which included the interview which took place on 20th October 1994 and a further interview which took place in January 1995, which was the culmination of the process leading to the termination of the contract.

Mr Kenny argues that it was wrong of the judge to conclude that he could rely upon that secondary evidence. It was for the Post Office to prove that the alleged overclaims had been made and, in order to do that, they had to prove the contents of the relevant documents. The best evidence of those documents would be the documents themselves. They were driven to rely on secondary evidence. He accepts, as he must indeed accept, that that evidence was admissible, but he argues that it was seriously unfair to the appellant either to admit it or to accept it as proving the Post Office's case. This is contrary to the overriding objective in the Civil Procedure Rules of doing justice between the parties and treating them on equal footing. It is also, he argues, contrary to the right to a fair trial contained in Article 6 of the European Convention on Human Rights. He makes a powerful case as to the unfairness and inequality between the parties resulting from the disappearance of the documentation.

Firstly, the defendant was not in a position to challenge or test any of the calculations within the schedules. They were accusing her of mistakes or omissions in her documentation, but she could not check to see whether they too had made mistakes or omissions in theirs. He gives two examples where there might have been mistakes. In one case they record a claim for two war pension payments when this sub Post Office only ever had one war pensioner to pay; and in another a sum is recorded in respect of child benefit which it is said could never be the right amount for a claim for child benefit. Mr Craig on behalf of the respondent Post Office says that these sorts of matters were challenged in evidence in the hearing before the judge and the judge did not find them particularly persuasive. But that is not the point that Mr Kenny is making. Mr Kenny is making the point that there might be all sorts of errors and omissions of this kind or others in these schedules, and there is no way in which the defendant could have had even the opportunity of checking.

Secondly, he points out that the Post Office had all the access that they wanted, while the defendant/appellant did not. They had been gathering evidence against her since 1992, and more strenuously since 1993, with a view to terminating her contract. The first she knew about it was when she was suspended on 20th October. At that stage clearly everyone was focusing on the suspension, the possibility of her contract being terminated and, indeed, all in the context of an interview which was putting allegations, not merely of discrepancies, but of outright fraud, to her. She did ask to see the originals. That is plain from a record made by her manager, Miss Watts, of subsequent events. She was told to ask Mr Williams about this. Mr Williams said that she should bring a solicitor or representative with her to any meeting, and Mr Kenny argues that that was not a real opportunity to go through the documents for the purpose of checking their accuracy. Indeed, at that stage there does not seem to have been a suggestion that they might bring separate proceedings in respect of the deficiency.

The first intimation of a claim was a letter for action in July 1995. This just gives the figures. They are not broken down in any way or supported by the schedules. The defendant's solicitor wrote asking for details in August, and there was no reply until more than a year later. She was then sent a statement of account breaking the sum down into the four items mentioned in the later further and better particulars. It is not clear whether the schedules were sent at the same time, but they do seem to have arrived by January 1998. But by that time, indeed it would appear much earlier, the originals which had been in the Post Office's possession had disappeared and no- one had asked the DSS in Northern Ireland to keep the originals that they had for the purpose of compiling the later schedule. Thus, Mr Kenny argues, the judge was wrong to hold that the defendant had any proper or realistic opportunity to examine the documentation.

Thirdly, he points out that this was a problem entirely of the Post Office's own making. He does not suggest that they deliberately lost or destroyed this material, but he does suggest that it was culpable of them to fail to take better care of it when they had been using it for the purpose, firstly, of dispensing with the defendant's services as a sub- postmistress and shortly after that bringing proceedings against her for the alleged deficiency. If ever there was a time when care should be taken of original documents it is then, and they did not take sufficient care to enable her to have equal treatment in checking their accuracy.

As a result of that cumulative unfairness, Mr Kenny argues his primary case that the judge should have exercised his discretion under the Civil Procedure Rules, rule 31.1(2), to refuse to admit this secondary evidence because it was contrary to the overriding objective and Article 6, even though it was admissible. His secondary submission is that, even if it was proper to admit this secondary evidence, the judge should not have regarded it as sufficient to establish that there were overclaims without corroboration. His third proposition is that, even if, given the totality of the evidence, the judge could be satisfied that there had been overclaims and, indeed, overclaims over a considerable period and amounting to a reasonably substantial sum, this could support, along with any other relevant evidence, the case for the termination of her contract. It could, therefore, support the dismissal of her counterclaim. But the judge should not have found that the claimant had proved, on the balance of probabilities, the exact amount of its debt. This is not a claim for damages in which the court has to make the best assessment as it can of the loss that has been caused. It is a claim for a sum of money which the Post Office says the defendant owes them. It is not enough in those circumstances to say: we know she owes something but we cannot really prove how much.

Against these submissions Mr Craig on behalf of the Post Office argues that it was not as unfair as is suggested. There was clear evidence given about the way the schedules were produced, both in Northern Ireland and by Mr Williams, and how the figures were checked. The majority of the schedules were checked by officials in the DSS who were independent of the Post Office. Miss Cassidy gave evidence on the three levels of check in the DSS, and some of it was done by her personally. The judge accepted the evidence of Miss Cassidy and Mr Williams and he was entitled to do so. Secondly, he says that that evidence is corroborated - - if that is the correct word - - by the record of the interview which took place on 20th October 1994.

In the course of that interview six specific discrepancies were put to the defendant totalling between them nearly £1,800. It appears that the defendant was accepting that the discrepancies indeed existed and that "something funny" was going on; she was merely seeking to suggest that somebody else may have been responsible for them. It appears clear that at that time the original documents were there to be checked. Mr Craig points out that the errors that were put to her then correspond with the figures in the schedules. He also makes the point that the interview that took place in January 1995, at which the defendant was accompanied by a trade association representative, was conducted on the basis that the errors were accepted but that the defendant was not responsible for them. He also argues that the defendant had a solicitor with her at the interview on 20th October 1994 who continued to act for her for some time (we know not how long) thereafter, and that she was offered the opportunity to obtain sight of the originals but that that was not taken up at the time.

He also argues that, by definition, the problem is the absence, rather than the presence, of sufficient dockets to support the summary in those cases: thus producing the originals would make no difference. That, of course, assumes that the claimant Post Office is right that the relevant dockets are, indeed, missing and cannot be found. For my part I find that not an argument which attracts me.

He goes on to argue that it has been assumed that the documents have been destroyed because they cannot be located, but this was not deliberate. Again, one of the problems with that argument is that, whether it is deliberate or not, the impact upon the fairness of the trial is the same, whatever the reason for their loss. There can be no doubt that these documents were in the possession of the Post Office, they were responsible for their safe- keeping and they failed in that responsibility.

Thus Mr Craig's major argument is that, for all those reasons, there was evidence which should have been before the court, it would be quite wrong, in effect, to shut the Post Office out entirely from its claim by excluding secondary evidence of these matters and it was sufficiently cogent, in all the circumstances, to support the findings made by the judge. If we are not persuaded of that, he suggests a middle course, which would include accepting liability for the three smaller items together with some of the DSS liability. That might be the six items totalling £1,800 admitted to, he says, in the interview and/or the sums attested to by Miss Cassidy when she checked them herself and by Mr Williams who had done the checks personally.

Those being the submissions, how does one resolve this difficult dilemma?

There is no doubt that this secondary evidence was admissible. The power in the Civil Procedure Rules rule 31.1(2) to exclude evidence even if it is admissible is principally a case management power designed to allow the court to stop cases getting out of hand and hearings becoming interminable because more and more admissible evidence, especially hearsay evidence, is sought to be adduced. It would be a strong thing to shut the Post Office out of not only its claim but, it would probably follow, its defence to the counterclaim, or much of its defence to the counterclaim, because of the non- existence of the originals in all the circumstances. I would, therefore, decline to say that the judge was plainly wrong in the exercise of his discretion to admit this secondary evidence.

Nevertheless, there was a substantial unfairness about this process. The defendant was asking for details, and had asked at an early stage to see the originals. I cannot see from the events between October 1994 and January 1995 a real sensible opportunity to take that up. Everybody was concerned with different matters at that stage, and it was all very fraught. The letters from Miss Watts about contacting Mr Williams to discuss matters in more detail did not in terms say: "And, if you want to see the originals, he will make them available to you for you to go through with your solicitor or other representative" That was not what was being suggested. So I accept Mr Kenny's submission that this was not a proper opportunity take it up then, especially in the circumstances that pertained.

Thereafter there were two lamentable failures on the part of the Post Office. The first was to respond to a prompt request for further details of the claim made in response to the letter before action. The second and even more serious was the failure to take proper care of the originals, which were the very foundation of their claim. These matters and the unfairness that resulted undoubtedly go to the weight to be accorded to the secondary evidence. The judge was undoubtedly impressed by the secondary evidence, and no doubt took into account the various matters prayed in aid in support of that secondary evidence. Again, for my part, I would not fault a finding by the judge that there had been overclaims over a considerable period of a sufficient amount to be an important factor in bringing to an end the defendant's contract and thus to support the dismissal of her counterclaim.

But it is a completely separate question as to whether that secondary evidence was of sufficient weight to prove the precise amount of the debt claimed. For my part, it seems to me that where an institutional creditor is relying on this sort of discrepancy in documents submitted by the alleged debtor and the alleged debtor has been from the beginning of the proceedings saying that they want more details, the claimant cannot readily be said to have discharged the burden of proving the precise amount of the debt when the claimant has been responsible for the loss of the primary evidence of that debt, coupled with the denial of the opportunity to the debtor to check those figures should the debtor wish to take it up. That is a very basic unfairness and to my mind it should have weighed very heavily upon the judge in deciding whether he was satisfied that the amount of the debt was proved.

As for the three smaller items, these are not seriously challenged; and I would be prepared to uphold the judge's finding that liability for those had been established. But, as for the major Department of Social Security item, I cannot regard the events of 20th October 1994 as amounting to real admissions that those precise sums were owing. That is not the real context in which those admissions were made. The context was one of: "We say there are these discrepancies. We say there is a pattern in them. We say something very serious to you. What is your explanation?" That is the flavour of that interview. In those circumstances, I do not feel able to uphold the judge's finding that the Post Office has proved its claim for any of the DSS liability. It is impossible to say what it was.

To that extent, therefore, I would allow this appeal, set aside the order of the judge and substitute an order in respect of the three smaller items so mentioned.

LORD JUSTICE KAY: I agree.