Royal Mail may have to pay withheld £40m compensation

by Daniel Farey-Jones, Brand Republic 21-Dec-05, 07:00

LONDON – Up to £40m in compensation payments could be paid after all to Royal Mail customers who initially lost out, after a High Court judge upheld a legal challenge to regulator Postcomm.

However, Postcomm and Royal Mail may appeal against the ruling. Both said they would wait until the New Year to see the full written judgement before deciding on their course of action.

Postwatch, which represents post customers, brought the case after differing with Postcomm over the amount of compensation the two organisations believed was due from Royal Mail to its customers for missing its service targets in 2003-4.

The total compensation due was £80m but Postcomm allowed Royal Mail to withhold around £40m from customers who had paid invoices late during the year.

Now a judge has ruled that Postcomm incorrectly interpreted a clause that said Royal Mail was under no obligation to provide compensation if a customer was "in default of credit terms".

Justice Sullivan said Postwatch was correct in interpreting the clause as a 'netting-off provision' allowing Royal Mail to withhold compensation to the extent that a customer owed it money. He suggested that the parties should come to agreement on payments.

Millie Bannerjee, Postwatch chairman, said: "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."

In addition to the compensation covering 2003-4, Postwatch estimated that another £10m-£15m could be paid to customers resulting from Royal Mail's 2004-5 performance.

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