The Post Office and Fujitsu agreed a deal 19 years ago to fix transaction errors in sub-postmasters’ accounts caused by bugs in the Horizon IT system, a document has revealed.

An agreement was in place in 2006 for errors caused by bugs in the software to be corrected, or for Fujitsu to pay the Post Office up to £150 per transaction if it failed to do so.

The revelation directly contradicts the Post Office’s claims during criminal prosecutions – which led to hundreds of wrongful convictions and civil cases that destroyed livelihoods – that no bugs existed capable of causing accounting shortfalls.

It also shows the Post Office knew almost two decades ago that Horizon could not always be relied upon to record transactions accurately.

Between 1999 and 2015, more than 900 sub-postmasters were wrongly prosecuted after the faulty Horizon IT system made it look like money was missing from branch accounts.

Some sub-postmasters went to prison, while many more were financially ruined and lost their livelihoods. Others died.

It has been described as the biggest miscarriage of justice in British legal history and has led to a long-running public inquiry into the scandal.

Countless evidence and testimonies have been heard, examined and reported during the inquiry, but a document which emerged in material published this month contained new, previously unknown, information.

The document shows that unbeknown to sub-postmasters, the two parties had a financial framework in place to manage discrepancies and for Fujitsu to fix problems or pay for them.

The Post Office denied throughout the criminal trials of sub-postmasters that errors or bugs could cause transaction shortfalls in branch accounts. It also denied in court that branch accounts could be remotely altered without the knowledge of sub-postmasters.

The document indicates the formal commercial arrangement was drawn up to deal with potential mismatches or “discrepancies” and where Fujitsu’s system was responsible, it was expected to correct false transactions or pay “liquidation damages”.

The disclosure also undermines the Post Office’s claim to the media and before Parliament in 2015 that it was not possible for Fujitsu to alter sub-postmasters’s transactions without their knowledge.

“The Post Office conducted both the criminal trials of postmasters and the group litigation of 2019 on the basis that it knew of no substantial problems with the Horizon system,” said Paul Marshall, senior barrister for sub-postmasters.

“Yet this shows that in 2006 there was a very big, recognised problem with Horizon maintaining data integrity between Post Office branch offices and Fujitsu,” he added.

“The Post Office, for 20 years, was saying the only explanation for shortfalls in branch accounts was postmaster incompetence or dishonesty.

“But the maintenance of data integrity was fundamental to the Post Office-Fujitsu contract – Fujitsu were unable to provide or assure this.”

The document implicitly acknowledges that data held on Horizon’s servers at Fujitsu’s headquarters could fail to match the transactions sub-postmasters had carried out at their branches.

It also adds to evidence that the Post Office was aware that the branch accounts of sub-postmasters could be remotely accessed. In the landmark Alan Bates vs Post Office case, for example, the organisation insisted that the software could not be accessed remotely by any other party.

Under the arrangements set out in the document, Fujitsu agreed to carry out a “reconciliation service” with the Post Office’s approval, where it was required

The document is dated four months before the Post Office started legal action against sub-postmaster Lee Castleton OBE pursuing him to recover £25,000 of cash it alleged was missing from his branch in East Yorkshire.

He represented himself in court, arguing that problems with Horizon were to blame, but lost and was landed with £321,000 in legal costs and ended up bankrupt as a result.

Mr Castleton is now suing the Post Office and Fujitsu for damages and said the document would help his battle.

“It’s a disgusting document. It’s another example of the truth being hidden for two decades. All the pain and punishment the victims have taken all these years and it was buried,” he told the BBC.

“It makes me feel physically ill to think they were doing that and not telling anyone…it’s time they were held accountable for all those actions.”

The document, first discovered by Post Office scandal campaigner Stuart Goodwillie, supports what whistleblower Richard Roll told BBC Panorama in 2015.

The former Fujitsu worker said the team working on Horizon would sometimes correct thousands of transactions per night because the firm could be forced to pay cash to the Post Office if it failed to do so.

The agreement also notes that Fujitsu can and will amend transactional data, with the need for the Post Office to approve the entries. A later version of the contract has been found where this stipulation has been changed to “where this is possible”.

The document is listed in an annexe in two corporate witness statements provided by Fujitsu’s current European chief executive, Paul Patterson, in 2024 but has only recently been published.

Mr Patterson will face questions by MPs on the Business and Trade Committee on 6 January about the Horizon scandal. Post Office chair Nigel Railton will also appear.

The material document has shocked experts on the scandal such as Second Sight forensic accountant Ron Warmington, who described the document’s implications as “dynamite”.

A Fujitsu spokesperson said: “These matters are the subject of forensic investigation by the Post Office Horizon IT Inquiry and it’s not appropriate for us to comment while that process is ongoing.”

A Post Office spokesperson said: “We apologise unequivocally for the hurt and suffering which Post Office caused to so many people during the Horizon IT Scandal.

“Today, our organisation is focused on working transparently with the ongoing public inquiry, paying full and fair financial redress to those impacted, and establishing a meaningful restorative justice programme, all of which are important elements of the ongoing transformation of Post Office.”