Filed on behalfofthe: Defendant

Witness: T. Dance

o r,i5'?TillJ)3' i,ilt
","
THE POST OFFICE GROUP LITIGATION
Claim Nos: HQ16X01238, HQ17X02637 and HQ17X04248

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

ROYAL COURTS OF JUSTICE

BETWEEN:

ALAN BATES & OTHERS

Claimants

AND

POST OFFICE LIMITED

Defendant

WITNESS STATEMENT OF TIMOTHY DANCE

l, TIMOTHY DANCE of 20 Finsbury Dials, 20 Finsbury Street, London EC2Y gAQ WILL
SAY as follows:

,l
t. I am the Retail Transformation lntegration Manager of Post Office Limited (Post
Office). I am authorised to make this statement on behalf of Post Office.

The facts set out in this statement are within my own knowledge, or if they are
outside my knowledge, I have explained the source of my information or belief.

ln this statement, where I refer to Subpostmasters, this includes all forms of

agent who operated branches on behalf of Post Office. This does not include
branches operated by Post Office directly, which are known as directly managed
(formerly Crown) branches.

4. My statement is in relation to business plans and Post Office investment in certain

branches. The provision of business plans is one part of the process for applying
for a role as a Subpostmaster. I understand from Post Office's solicitors that
other elements of the application process are dealt with in the statements of
Sarah Rimmer and John Breeden.

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 Claim Nos: HQl6X01238, HQ17X02637 and HQ17X04248

5. Post Office's solicitors have provided me with the documents referred to in this
witness statement relating to Lead Claimants Mrs Elizabeth Stockdale and Mrs
Louise Dar to use as examples when discussing business plans for the purposes
of preparing this statement.

BACKGROUND

6. I held various positions at Royal Mail between June 2003 and November 2012

7. From November 2012 I moved aoross to Post Office, and from that date until May
2017 Iwas the Finance Performance Manager for Post Office's Network
Transformation (NT) programme, which was a large scale restructuring of the
Post Office network (see also the statement of Angela Van Den Bogerd). lt is my
time as Finance Performance Manager that is the main focus of this statement.

8. As Finance Performance Manager, I was part of the Network Finance team and I

reported.to Sharon Bull, the Finance Director (Network and Sales) at Post Office.
My responsibilities included supporting Sharon Bull in the governance of the NT
programme's financial processes. By governance, I mean ensuring that financial
processes are in line with Post Office and NT requirements for due diligence in
the business plan evaluation and payment to Subpostmasters. This, in turn,
included overseeing the governance of procedures for reviewing:

8.1 Business plans submitted by potential new Subpostmasters; and

8,2 lnvestment in branches. This included branches operated by existing

Subpostmasters who wished to convert their traditional (Subpostmaster)
contracts to new contracts (Mains or Locals) offered under the NT
programme (NT Branches), or new applicants who wished to apply for a
position at an NT Branch where the existing Subpostmaster wanted to
leave. (l was not responsible for overseeing financial checks regarding
reviewing investment for non-NT Branches, i.e. where an applicant was
applying to take over a branch that would remain on a traditional
(S ubpostmaster) contract.)

AC_151008694
 Claim Nos: HQ16X01238, HQf 7X02637 andHQ17X0424B

BUSINESS PLANS: PURPOSE AND CONTENT

In order to apply for a role as a Subpostmaster, applicants are required to

complete a business plan. The business plan is just one part of the application
process. lt is a 'gateway' step through which the applicant must pass in order to
be able to proceed to the next stage and interview.

10. The purpose of these business plans remained unchanged throughout my time as
Finance Performance Manager: namely, to assist in making a risk assessment of
applicants and to show whether the proposed business would be viable.

11. The fundamental requirements of how business plans were submitted also did not
change significantly during my time as Finance Pe#ormance Manager. The most
significant refinements and modifications were:

11 .1 The development of online electronic business plans in February 2015, to

avoid the need for applicants to print and send everything in paper
format;

11.2 The introduction of an Excel 'marking grid' tool to guide the Business
Plan Finance team in reviewing business plans. The purpose of this tool
was to assist the Finance Analysts in their review of the Business Plan;

11.3 The requirement for applicants for small branches to provide less
information (supporled by input from Field teams). By small branches, I

mean branches with an agent remuneration of less than t10,000 per

annum. Accordingly a small branch had lower cash holdings and a lower
investment from Post Office, with a correspondingly lower risk to Post
Office if that branch failed; and

11.4 The offering of a simpler process for large companies that operate
branches (such as Maftin McColl Limited and The Co-operative Group
Limited), known as Strategic Partners, for whom a prior risk assessment
is carried out before an application is submitted. For each application
made, Strategic Partners did ncit need to submit a business plan, but
instead had to complete a director security check and a valid prope(y
interest declaration (the latter to check that there are suitable occupation
rights relating to the branch premises). Post Office monitors Strategic

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 Claim Nos: HQ16X01238, HQ17X02637 and HQ17X04248

Padners every 6 months by reviewing their publicly-filed accounts,

Experian credit reports and press commentary.

However, the core process underpinning the role of the business plan in
applications (allowing a risk review to be carried out) did not change in this
period.

12. The business plan covers the Post Office branch itself, as well as any associated
retail business. Post Offrce typically looks for a sustainable retailer, especially for
the Locals model, so that Post Office and the retail part of the branch act as
footfall for one another to attract customers and help cover the overheads of
running the premises. Some larger Mains branches do not have retail as they
generate sufficient remuneration from Post Office activities. Post Office would
discuss with the National Federation of Subpostmasters (NFSP) the questions
asked in business plans. The NFSP, therefore, was aware of what information
applicants had to provide in their business plans. By way of example, I refer to
the business plans of Mrs Stockdale below. I confirm that the proforma used here
was consistent with the business plans being requested by Post Office at the
time. From these business plans {C-0000284137-55} and {POL-0000542} , you
can see that this information included:

12.1 Detaitsof the last 3 years' income and expenditure for the retail
businesses that would operate alongside an applicant's branch
(assuming that the retail business was already in operation);

12.2 lnformation regarding the last 3 years' trading, together with the
applicant's 3 year forecast for the retail business and Post Office branch;

12.3 Details of the main products sold in an applicant's retail offering;

12.4 Employee hours for servicing Post Office counter positions;

12.5 Details of available funding to meet any start-up costs (supported by

documentary evidence, including the terms and conditions of any loans);

12.6 Details of savings / funds available for contingencies,

12.7 Details of the applicant's assets and liabilities; and

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 Claim Nos: HQ16X01238, HQ17X02637 and HQl7X04248

12.8 Evidence of the applicant's interest (or proposed interest) in the branch
premises.

COMPLETION OF BUSINESS PLANS

13 Once an applicant expressed an interest in operating a Post Office branch, the

Agent Applications Processing Team (AAPT) (which provides administrative
support for the appointment of Subpostmasters) would send an email to the
applicant, setting out each step involved in completing the post Office,s
requirements for the application (for example, see AAPT's email and attachments
sent to Mrs Stockdale {PoL-0030390} ). I understand from Post office's solicitors
that the AAPT role is covered in more detail in the witness statement of sarah
Rimmer. Whilst I was not responsible for this aspect of the process, my team
(Network Finance) was responsible for the content of the proforma Business plan
sent with MPT's email to the applicant. My team, together with AAPT and the
NT teams, was responsible for the explanatory communications about the
completion of the Business Plan. These documents are explained below.

14. The MPT sent applicants a standard form business plan to complete in full,
along with detailed guidance to assist with its preparation (covering, for example,
the scope of information required). For example, please see:

14.1 The 'Guide to Assist with Preparation of the Business Plan' {POL-
0030393) ; and

14.2 The guide'Completing the financial assessment'{C-0002932} .

Field teams worked with applicants to complete the business plan, for example
by talking through the plan's requirements and advising on suppoding documents
which were needed.

15. Post Office did not advise applicants on the business plan or offer any
assurances as to a plan's credibility or a branch's expected future income. See,
for example, tab 1 within the business plan sent to Mrs Dar by Post Office
{POL-0032533} , in which Post Office confirmed "lt should not be assumed or
implied that this buslness plan has been prepared, checked, approved or
endorsed either as whole or as to any pafticular part by Post Office Ltd. Figures
included in this business p/an which have been provided by Post Office Limited,
namely the estimated fees for year 1 are esilma/es ln a// cases and no warranty

AC_l51008694
 Claim Nos: HQl6X01238, HQ17X02637 and He17X04248

or guarantee as to their accuracy is given by Post office Limited. [...] There is no

guarantee that these are the actual fees you would receive,,.

16. The business plan itself was only a gateway check for applicants, representing
just one component of the subpostmaster application process; it would not by
itself determine whether a subpostmaster was appointed. Beyond what can be
obtained about corporate applicants via Experian credit checks and companies
House searches, information concerning applicants' sophistication and previous
business experience is not publicly available, so the business plan was a way for
Post office to understand more about the applicant. As a result, applicants also
provided supporting evidence such as the following (see, for example, the
requirements detailed in {POL-0030394} , sent by AApT to Mrs Stockdate):

to. I Bank statements;

16.2 Credit searches. All applicants are asked to provide such searches, but
while Post Office would not be able to run credit searches or make
further flnancial enquiries on individuals or non-corporate applicants
without their prior consent, it could run further searches on a corporate
applicant if it had any concerns about the information on the search
supplied, without needing to obtain that corporate applicant's consent;

16.3 Details of applicants' most recent 5 years of employment (in the case of
company applicants, we required details of 2 directors' or 1 director's and
a company secretary's most recent 5 years of employment); and

16.4 A criminal record check.

17. The application process also covered whether the applicant wished to apply to
operate a branch as a sole trader, limited company or partnership, and
established whether there was more than 1 applicant.

18. Where applicants already operated a Post Office branch, Post Office might also
check (on a case by case basis) their existing Post Office financial performance.
We did not know the amount which applicants had paid for any retail business
accompanying the Post Office branch - that would be a privately agreed
arrangement which Post Office would not get involved with.

AC_151008694
 Claim Nos: HQ16X01238, HQ17X02637 and He17X04248

19. The Network Finance team (of which, as Finance Performance Manager, lwas a
part) was responsible for the questions asked in the business plan, whilst each
applicant was responsible for the content included in its plan.

Post Office did not know whether applicants were acting on the advice of solicitors
when they pursued branch purchases; the application carried a disclaimer of any
Post Office assrrrance regarding the viability of the business plans and the
business plans required a confirmation from applicants that they agreed to obtain
their own professional advice on iheir plan.

REVIEW OF BUSINESS PLANS

21. Once the application and business plan were completed by the applicant, the
information provided was collated by the AAPT. The MpT tracked the
application throughout the process and assigned it to the Business Plan Finance
team and Network HR teams to conduct their checks; these teams did not report
directly to me. The Network HR team was responsible for the aspects of the
application concerning County Court judgment checks and criminal records
checks, which enabled this team to manage the risk of Subpostmaster default and
branch closure.

The AAPT would send the applicant's submitted business plan to the Business
Plan Finance team; for example, see tab 8.6 within the 'Level 3 - NT Programme
lmplementation' process map, included within the 'Overuiews of appointment /
application process' produced in 2012 {POL-0155861/6} .
The Business PIan
Finance team would conduct an initial review of a business plan as a whole
(which involved checking figures and financial information in supporting
documents) to make a risk assessment of the applicant

23. This initial review also involved the Business Plan Finance team extracting
numerical data from the business plan into the Excel 'marking grid' tool that I
referred to in paragraph 11.2 above. This Excel tool would generate a risk score
for the business plan, to indicate areas where the plan has passed or failed the
criteria. This spreadsheet is shown in the document 'Record of Finance Plans'
within the 'Agent Business Plans - Final Version of Business PIan Pack'
{POL-0219331}. The purpose of this scoring was not to provide a final
determination, but to act as a tool which highlighted areas that (in light of the
plan's risk profile) needed particular attention by the reviewing analyst in the

AC_151008694
 Claim Nos: HQ16X01238, HQ17X02637 and He17X04248

Business Plan Finance team. The scoring also indicated specific areas to be
checked on subsequent reviews of a branch's trading accounts, credit scores and
other key metrics, To document this analysis, the Business plan Finance team
would make notes on an Excel spreadsheet and on the application file, and
feedback its thoughts and comments via the AAPT.

24. lf more information was required before a decision could be made, then the
reviewing analyst in the Business Plan Finance team would ask AApT to obtain
the additional input from the applicant. For example, see the email from a
Finance Analyst to AAPT {POL-0031378), where, in respect of Mrs Dar's
business plan, the reviewing analyst requested a missing profit and Loss
statement, current bank statements and evidence to support declared additional
income. Once any additional information was ,obtained, the Business plan
Finance team would complete its review.

PASSING AND FAILING BUSINESS PLANS

25. A fail on any element of the business plan would not necessarily mean that the
application as a whole would be rejected. The risk arising from the failure of
1 aspect of a business plan could be mitigated by the plan's content in another
area: for example, a low net profit figure might be viewed in the context of high
figures for disposable personal income and assets, to conclude that an applicant
could manage their liabilities such as the payment of tax. Post Office also
reviews how the business plan covers Post Office and retail income and costs to
evaluate the net profit and cash flow of the business.

26. Categories with a 'fail' score but which were not significant would be reviewed by
a Supervisor in the Business Plan Finance team; if a plan failed marginally after
that review (or if unusual areas required consideration), it would be escalated to
me for an 'exception review'. I would gather fudher information and then consider
if I was comfortable to approve the business plan. lf the error or inconsistency
was not material to the outcome, e.g. if the applicant had keyed in incorrect
information compared to their accounts or Experian result, then the applicant
would be asked to make a correction. ln the majority of cases, though, an error
meant I would not approve the business plan without going to the next level of
review. lf I did not approve the business plan but considered it merited further
review then I would gather the further information required and refer the business
plan to an Exceptions Panel consisting of me and senior representatives from

AC_15'1 00869{
 Claim Nos: HQ16X01238, HQ17X02637 and He17X04248

either the NT programme or from the Business As Usual (BAU) team (depending
on branch type: BAU would be involved where the branch was either on a
traditional (subpostmaster) contract and the applicant would also be on the same
contract, or where the branch had already been conveded to an NT Branch, in
which case the applicant would also be operating it as an NT Branch). lf an
agreement on whether to pass or fail the business plan could not be reached by
this Excepiions Panel, it would be referred for discussion between my boss (the
Finance Director) and the Network Director. Factors considered at this escalated
discussion could include: if the applicani would be the only subpostmaster in the
area and resourcing implications of terminating / replacing current agents based
on the financials of the new applicant.

27. lf the business plan failed the review at this escalated stage, the Business plan
Finance Team would inform MPT who would advise the applicant that the
application had been unsuccessful, but that they could resubmit it for re-
consideration with any changes that they might wish to make.

Post Office did not give reasons for rejecting a business plan - see, for example,
item 5 (an example letter to an unsuccessful applicant from Post office) within
{POL-0155771} and which confirms "[ is against Post Office Ltd policy to give
reasons why a particular application has been unsuccessful', An exception would
be if the failure to approve a business plan was due to an administrative error by
the applicant, for example if an extra '0' had been inserted into a figure. ln that
case, AAPT would return the business plan to the applicant, ask for the suspected
administrative error to be reviewed and request that the plan be resubmitted
accordingly.

29. Where the business plan did not appear to be viable, the applicant had to decide
how to change it if they wished to continue with their application. Post Office
never changed applicants' business plans or corrected administrative errors on
applications. lf an applicant resubmitted their business plan, they would have to
account for the changes made (for example by explaining the basis of any revised
figures). After an amended business plan was submitted, the Business Plan
Finance team would also ask the Field team working with the applicant whether
the new proposals for the retail proposition in the relevant geographical area were
feasible.

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 Claim Nos: HQ16X01238, HQ17X02637 and HQ17X04248

30. lf the business plan passed (either after the Business Plan Finance Team's initial
review, or after escalation), the applicant would be informed of this by the AApT
and invited for interview with the Contracts Application Processing Team.
Applicants would be asked to bring their business plan to interviews and discuss
its content. Please refer to the witness statement of John Breeden, which covers
the interview process.

INVESTMENT IN NT BRANCHES

31. This section of my witness statement concerns the nature and extent of
investment by Post Office in NT Branches during my time as Finance
Performance Manager.

Jt. Post Office investment in NT Branches falls into 2 categories: Enabling Costs
and Equipment Costs.

Enabling Costs related to steps needed so that Post Office equipment could be
installed at branches, such as the costs of clearing premises prior to equipment
installation. ln some instances, Post Office would incur substantial Enabling
Costs for modernising dilapidated properties. Subpostmasters were responsible
for obtaining contracior quotes for Enabling Costs.

34. Equipment Costs were the costs of:

34.1 Items owned by Post Office and used in NT Branches, such as the
Horizon system terminals, desks and safes; and

34.2 The costs of installing and setting up this equipment.

There was a notional maximum level of investment for which Post Office
budgeted; this amount was calculated by assessing the number of counter
positions in a branch, and whether (depending on the products and services
offered) they were classified as Mains or Local branches. This approach allowed
Post Office to contribute up to 50% of Enabling Costs in new Mains branches.
We called this 'match funded', because Post Office contributed the same amount
to new Mains branches as the applicant, up to a maximum contribution level
which was assessed by considering the branch's typical cost on the basis of the
number of counter positions. For existing Mains and Local branches, Post Office
would pay 100% of Enabling Costs. A Subpostmaster would bear the approved

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 Claim Nos: HQ16X01238, HQ17X02637 and He17X04248

Enabling costs upfront, and Post office would subsequently reimburse the
approved proportion. The approved Enabling Costs reflected the
following; (1) what the Subpostmaster could afford to fund, (2) whether the work
would benefit both the Post Office business and the retail business at the branch
and (3) how the benefits would be shared between these 2 parts of the business.

JO. The Post office Property team would visit an NT Branch and prepare an initial
report on investmeht, recommending (for example) the number and type of
counter positions, based on factors such as branch security and products. These
reports would be provided to Field teams, who would have discussions with
Subpostmasters to scope the prospective Equipment Costs and Enabling Costs.
The NT Supplier team would review quotes and report to the team in which I sat,
the Network Finance team, to consider the total proposed investment.

37. I was involved in the financial controls underpinning approval of Equipment Costs
and Enabling Costs investment in NT Branches. My team (Network Finance)
reviewed batches of investment, to check that the NT Supplier team had been
considering proposals within budget guidelines and according to permissible
types of expenditure.

38. Subpostmasters seeking more investment lhan what was initially offered by Post
Office could (following a discussion with their Field team) submit quotes for the
overspend to the NT Supplier team for an initial consideration of the proposal.
This proposed overspend could relate, for example, to additional Enabling Costs
to address dilapidaticns. If, after consulting the Field team, the NT Supplier team
deemed the additional investment reasonable, I would consider the proposal and
pass my recommendation on to my boss Sharon Bull to approve. Factors
relevant to the consideration given by me and Sharon included whether additional
investment would ultimately benefit Post Office in terms of improving customer
service, Post Office income and the long-term viability of the branch (for instance,
by attracting retail footfall so it would be more attractive for the owner of the retail
business to operate a Post Office branch from the premises).

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 Claim Nos: HQ16X01238, HQ17X02637 and HQ17X04248

INVESTMENT IN OTHER BRANCHES

My responsibilities relating to investment concerned NT Branches (as detailed in

paragraph 37 above). However, I understand from John Breeden that for
prospective new Subpostmasters wanting to replace outgoing Subpostmasters at
existing branches (i.e. BAU), the proposed Enabling Costs and Equipment Costs
would also need to be addressed in business plans. lnvestment in branches
operated by these Subpostmasters was within the remit of BAU rather than
handled by the NT programme.

STATEMENT OF TRUTH

I believe that the facts in this witness statement are true.

-fr,uo-5y1y
Signed:
DflngcE

Date:
2z10eltg

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