Postmasters bankrupted by the Post Office Horizon IT scandal deserve more than £300,000 compensation for reputational damage under a century-old ruling, an inquiry has been told.
The Post Office implemented a new accounting system in branches in the 1990s, but an IT error led to shortfalls in branch accounts.
Postmasters were accused of taking money from tills and forced to cover the losses themselves. Some were wrongly prosecuted, leaving their reputations in tatters.
The official compensation scheme has been criticised for offering a maximum of £10,000 for severe reputational damage, with the Government accused of “penny-pinching”.
An independent legal opinion from Catherine Addy KC, submitted to the inquiry at the request of Sir Wyn Williams, the chairman, states that there is no clear modern precedent for how much affected postmasters should be awarded for reputational damage caused by bankruptcy.
However, she cites a 1919 case in which a Major Wilson left his company in the hands of United Counties Bank and returned from overseas after to bankruptcy after the First World War. In June that year, he was awarded £7,500 for subsequent reputational damage caused.
Ms Addy calculates that, in modern terms and accounting for inflation, the sum equates to £306,493.06. She describes this as “not excessive” but says the equivalent payout in the modern world may be lower because of the stigma of bankruptcy being less now than it was a century ago.
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Lawyers representing the affected postmasters say the £10,000 for reputational damage is inadequate, while the maximum of £60,000 for bankruptcy damages is “out by an order of magnitude”.
A hearing on Thursday is hoped to increase the speed at which the inquiry is moving, because some postmasters are dying before they are compensated. Some who have been paid out are also losing the majority of their claims as a result of tax bracket implications and bankruptcy creditors taking a huge portion of the cash.
The problems have been raised with Sir Wyn, who is pushing for compensation to be paid out quickly.
David Enright, a partner at Howe & Co Solicitors, which represents 156 sub-postmasters, told The Telegraph: “In scheduling regular and dedicated compensation-focused hearings, Sir Wyn Williams is demonstrating his concern that sub-postmasters, whose lives have been devastated by this scandal, are not receiving the compensation commensurate with the harms inflicted on them, and that the pace of the compensation process is simply too slow.”
Mr Enright said his clients were “gravely concerned” that the Department for Business and Trade was “penny-pinching in its approach”.
He said the damage to the reputation of postmasters was extraordinary, adding: “Postmasters were central figures in the community, known and trusted by all. Consequently, when they were accused of fraud or theft it shattered their reputation.”
‘Long-standing and escalating concerns’
Mike Schwarz, a partner at Hodge Jones & Allen, which represents some sub-postmasters, told The Telegraph: “We have serious, long-standing and escalating concerns about the compensation schemes as a whole.
“They appear to lack coherence, transparency, fairness, and independence. There is a very real risk that further injustice will compound past miscarriages and misconduct. Our clients put their faith in the chairman to address the increasingly apparent and fundamental flaws in the schemes before it is too late.”
A Department of Business and Trade spokesman said: “The impact that the Horizon scandal has had on postmasters and their families is utterly horrendous, and it is crucial that affected postmasters are fairly compensated.
“To date, over £100 million has been paid in compensation to victims of the scandal, and we will continue to compensate the 492 eligible postmasters in the Group Litigation Order before the August 2024 deadline.”