Gould: Corporate governance failures have real-life consequences
A solicitor who acted for three wrongly convicted sub-postmasters has questioned whether lawyers advising the Post Office’s board were more motivated by continuing the retainers than giving proper guidance.
In a submission [1] to Sir Wyn Williams’ statutory inquiry into the Post Office scandal, Nick Gould said there needed to be more focus on the corporate governance failings at the highest level of the organisation.
Though Mr Gould is a corporate partner at Aria Grace Law, he acted pro bono for Seema Misra – who had been jailed while pregnant – Tracy Felstead and Janet Skinner in overturning their convictions. Barristers Paul Marshall and Flora Page were their counsel.
He said he made his submission on the Post Office Ltd’s (POL) corporate governance failures as “this topic does not seem to have interested anyone in the academic world”. The focus has been far more on the hundreds of private prosecutions and other actions against sub-postmasters POL took based on the faulty Horizon IT system.
Corporate governance and directors’ duties “are far too often dismissed as having any no relevance to real lives and real deaths”, Mr Gould said. “The behaviour of the boards of Post Office over the years disproves, completely, that comment.”
He said POL’s failure to make available various documents before, during and after hundreds of trials over many years meant it was “almost certain there were significant delays in overturning convictions which senior management in POL, and its lawyers (both internal and external), knew to be unsafe”.
Mr Gould went on: “In terms of the board of directors and individual executive directors, it needs to be established as to what they knew and when? A constant theme of this paper is that, if they didn’t know, why not and if they knew, why did they not act, and indeed if they decided not to act based on advice – what advice?
“The ‘not knowing/covering-up/non-disclosure’ has lasted for decades… Indeed, the issue has been raised by the inquiry itself.
“It would seem too that many senior figures improperly delegated or fettered their judgment to ‘professionals’, and it would appear that these professionals had one thing in mind, not to provide proper advice (which would in some cases involve advising that they are conflicted), but to see their retainers and engagements continue. A cynical view, or a view borne out by facts is for others to determine.”
The solicitor questioned whether POL was seen by many external firms and advisors “as a recurring income stream”.
This was coupled with “woefully unqualified long-term mid-level managers who had no interest (and/or who did not have the skills) to question the system within which they were operating”.
When it came to lawyers, Mr Gould said it was individuals, rather than entire firms, who did “appalling things and in many cases, the results of their actions [were] the destruction of lives”.
He continued: “Some lawyers did nothing to justify their positions as officers of the court. Who advised the board of POL (if indeed anyone did so) will no doubt be a question for the enquiry.
“What happens after the enquiry ends should be of key concern for the legal profession and its regulators.
“It is hoped that, at the very least, a new practice direction applicable to both in-house and external lawyers is developed, to ensure that, i.e., in the case of the Clarke advice, lawyers owe a clear obligation to disclose directly relevant material – regardless of the views of their client.”
This now-infamous legal advice told the Post Office back in 2013 that the convictions it had secured may be unsafe but it only came to light in 2020.
He stressed in particular section 172 of the Companies Act 2016, which places on directors a duty to promote the success of the company and laid out four key questions.
“Did: (i) no director understand the implications of the Post Office scandal over some 20 years; and/or (ii) no director during that period think it was a resigning matter and/or; (iii) no director know (enough/anything) about it and/or; (iv) each director think the law, whether section 172 or other parts of company law, apply only to other directors of other companies?
“Were there elements of Nelsonian or reckless blindness at play?”
Mr Gould argued that any POL board member still in place today should have resigned no later than 24 April 2021, the day after the first 39 sub-postmasters had their convictions overturned.
He wondered whether any of the external law firms retained by POL or, if not, its various general counsel were ever asked to provide advice about laws applicable to directors.
“If not, why weren’t they pro-active in speaking to the board? Or perhaps those lawyers were pro-active but were ignored?”
Other questions were why the government, as POL’s sole shareholder, not exercised its power to remove any directors and why POL “seems to have escaped the scrutiny” of the Financial Reporting Council.
The final, and biggest, issue was the moral dimension, Mr Gould said, citing Australian judge Neville Owen’s words in the Royal Commission into the collapse of HIH Insurance in 2003, who said: “Did anyone stand back and ask themselves the simple question – is this right?… Did they ever apply the olfactory [smell] test?”
Mr Gould said: “I suggest that every director of POL (and before that, of the Royal Mail), going back some 20 years, failed the ‘smell test’. Each failed it massively and miserably.
“I submit on behalf of our clients, Tracy Felstead, Janet Skinner and Seema Misra, each director past and present, should be held to account by the legal system they sought to ignore and/or mislead.”