Business postal customers win wrongly withheld GBP40 million in compensation battle

In a landmark Judgment the High Court has found in favour of the postal watchdog, Postwatch, against the economic regulator, Postcomm. This is the first time a Consumer Council has successfully Judicially Reviewed an industry regulator.

Millie Banerjee, Chair of Postwatch, commenting on the High Court's decision said: "We are, of course, delighted the Judgment is in our favour. This is an important outcome ensuring Royal Mail's customers receive the £40 million of withheld compensation they were due for service failures in 2003/04. Customers have been patient but hopefully can now see light at the end of what has been a long legal tunnel.

" Members of the Postwatch Council should be congratulated for taking the bold decision to take the case on behalf of customers all the way to Court. The result clearly vindicates their decision to pursue the customers' case by whatever means were available. Judicial Review is a big step and by necessity a last resort. I joined the Council on 1st December and am pleased to be working with a Council that has the determination to do the right thing, not the easy thing.

"One of our first challenges is to put in place the processes that will ensure Postwatch and Postcomm work jointly to achieve the right outcomes for customers. Royal Mail now needs to deliver what the Court has decided and pay in full the compensation due to customers."

BACKGROUND

In 2003/04 Royal Mail failed all 15 of the minimum standard of service targets contained in its licence. This should have led to bulk mail customers of Royal Mail automatically receiving compensation. 1 per cent off their annual bill for every 1 per cent the relevant product target was failed up to a maximum of 5 per cent. The total compensation due to bulk mailers was around £80 million.

The Compensation Scheme that was determined by Postcomm in October 2003 properly allowed for Royal Mail to net-off from compensation any unpaid invoices. However, Royal Mail wrongly tried to use late payment of invoices across the year as an excuse for refusing to pay the compensation due. This resulted in around £40 million in compensation payments being withheld.

When Postwatch brought the wrong interpretation and licence breach to Postcomm's attention, Postcomm decided to side with Royal Mail against the customer interest.

In his landmark Judgment, Mr Justice Sullivan found that Postwatch's interpretation of Postcomm's Compensation Scheme was correct and that Postcomm was under a duty to use its enforcement powers in respect of Royal Mail's licence. Postcomm should now agree with Royal Mail or, in the absence of agreement, order them to pay the £40 million outstanding compensation due.

Postwatch also expects that the compensation bulk mail customers are owed for poor performance in 2004/05 to be paid as per the correct interpretation of the Scheme.

COMPENSATION CASE VICTORY FOR BULK MAIL CUSTOMERS
PA News, p 1 12-19-2005
By PA By John Aston

Thousands of Royal Mail customers who have received poor service could be in line for new compensation payments following a High Court ruling today.

The Consumer Council for Postal Services, known as Postwatch, won a legal challenge against Postcomm, the UK postal regulatory body.

The case arose after Postcomm refused last January to order the Royal Mail, which has already paid out some £35 million, to pay another £35 million to users of bulk mail services which were not up to standard.

Postcomm declined to make an enforcement order under the 2000 Postal Services Act for the financial year 2003-4.

Postwatch argued that Postcomm was under a statutory duty to enforce.

Today, Mr Justice Sullivan, sitting at the High Court in London, ruled in favour of Postwatch but gave Postcomm and Royal Mail time to consider appealing to the Court of Appeal.

The case turned on the disputed interpretation of an exclusion clause in the statutory compensation scheme.

After today's judgment, Postwatch chief executive Gregor McGregor said: “We are very satisfied with the outcome today.

“This is a very important victory for customers, and our interpretation of the scheme has been vindicated.

“The important point now is that we should move together with Postcomm and the Royal Mail to ensure customers receive the money they should have had nearly 18 months ago.

“We say many tens of thousands of customers have been wrongly denied compensation.”

Although today's ruling was concerned specifically with 2003-2004, compensation claims for the current year could also be affected by the legal ruling.

A Postcomm spokesman said after the judgment: “We will need to look at the full judgment before deciding on our next steps.”

During a recent hearing which led to the ruling, David Pannick QC, appearing for Postwatch, told the court: “There is no doubt that in the financial year 2003-4 – the first year for which the scheme applies – Royal Mail failed to meet any of the quality of service targets under their licence.”

He said: “We estimate that what would otherwise be compensation of £70 million for the aggrieved customers of the inadequate service has been reduced to compensation of £35 million by reason of the disputed interpretation adopted by Postcomm.”