UK High Court rejects Royal Mail's appeal against Postcomm
The High Court has today upheld the GBP 9.62 million financial penalty Postcomm levied on Royal Mail for failing to protect adequately the mail in its care, following an appeal of the penalty by Royal Mail. The judgment reinforces Postcomm’s position that the fine is proportionate and reflective of the loss suffered by customers.
Royal Mail did not dispute Postcomm’s finding that it breached its licence requirements to keep mail safe and secure, nor that this breach was serious; it appealed only against the level of the financial penalty.
On 24 August 2006, Postcomm imposed a financial penalty of GBP 9.62 million on Royal Mail for breaching its licence by failing to properly protect the mail in its care. The penalty followed a review of Royal Mail's mail integrity procedures, during which Postcomm found that some important features of Royal Mail's procedures were not being applied across the business.
The most significant weakness found was the poor management of the recruitment and training process for non-contract (agency) staff. In addition, the framework and information systems that Royal Mail had put in place to prevent the loss, theft or damage of mail were not operating effectively. These weaknesses significantly reduced the company's ability to protect customers' mail.
Postcomm Chief Executive Sarah Chambers said:
“Postcomm has a duty to protect the interests of customers who are entitled to expect that their mail will reach its destination. Our review uncovered serious shortcomings in Royal Mail's application of its procedures for properly protecting the mail during 2004/05, and Royal Mail did not dispute these findings.
“We believe the GBP 9.62 million fine is a proportionate penalty for these failings, and we are pleased that the High Court has upheld the penalty, and awarded costs to Postcomm. During 2004/05, Royal Mail estimated that around 14.6 million letters, packets and parcels in its care were lost, stolen, damaged or interfered with.”
Notes for editors
The penalty was first proposed on 10 February 2006, when Postcomm published a consultation document proposing an amount of GBP 11.38 million. After taking account of representations from Royal Mail and other respondents, Postcomm published its proposal to vary the penalty to GBP 9.62 million last June, and finally imposed this penalty in August.
The relevant documents associated with this review can be found on the Royal Mail – quality of service consultation page.
In determining the level of the penalty, Postcomm reviewed all the responses to it’s original proposal and took as its starting point the fact that the average postage rate for all mail, across all classes and weights – when multiplied by 12 (in line with Royal Mail’s own compensation policy) – came to GBP 3.21. In 2004/05, around 15.76 million items of mail were lost, damaged or stolen. If the GBP 3.21 was applied to all these items, the notional amount payable to customers would be GBP 50.59 million.
Postcomm recognised that it would not be possible to eliminate all losses in such a large volume of mail, and it took the view that a 50% reduction in volume would be reasonable. However, Royal Mail had already compensated some customers – in 2004/05 it paid out GBP 14.62 million in compensation for lost and damaged mail – so, deducting this, Postcomm was left with a baseline figure of GBP 10.68 million. This was adjusted to GBP 9.62 million after taking account of mitigating factors.
Postcomm’s mail integrity code sets out what licensed operators must do in practice to keep mail safe and secure. It came into force on 1 January 2006, when the mail market opened to full competition and is compulsory for all licensed operators. Before 2006 – and during the period to which this financial penalty relates – Royal Mail was required to comply with the mail integrity procedures it had itself set up.
