A Fujitsu director described a subpostmaster as a “bad guy” before a legal battle that left him bankrupt, an investigation has heard.

Peter Sewell, who was part of the company's Post Office account security team, made the comment about Lee Castleton in an email in 2006.

Mr Castleton was found to have a £25,000 deficit at his branch after being sued by the Post Office.

“I don't know why I wrote that,” Sewell told the inquiry.

In response to this revelation, Castleton told the BBC that the comment surprised him because he had not met, communicated or spoken on the phone with Sewell.

“It's obviously hard to hear, but it's not something I didn't expect,” he added. “I think we're all realistic and we knew there was some kind of conspiracy out there and it was laid out for everyone to see.”

Fujitsu developed Horizon software used by the Post Office which was later found to be flawed and incorrectly made it appear as if money was missing from branches. More than 900 submasters and postmasters were prosecuted for theft and false accounting from 1999 to 2015 based on Horizon evidence.

It has been described as the most widespread miscarriage of justice in the UK.

Mr Castleton's branch was found to have a deficit of £25,000 and was subsequently put out of business following an audit carried out almost 20 years ago. The Post Office spent two years and £320,000 pursuing him for the missing money through the civil courts.

The investigation into the scandal heard that Sewell appeared to offer words of encouragement in an email exchange with his colleague, IT security analyst Andrew Dunks, before legal proceedings began against Castleton, who ran a post office in East Yorkshire.

“See you in court then,” the email said.

“The shackle alley is where they used to hang people out to dry. Though, I don’t think that kind of thing happens anymore.”

“Castleton is a bad guy and will do anything in his power to destroy the FJ (Fujitsu) name. It is up to you to maintain absolute power and integrity no matter what the prosecution throws at you.

“We will all be behind you hoping you pass safely. God bless you.”

“Thank you for those kind and encouraging words,” Mr. Dunks replied. “I had to stop mid-reading to wipe away a small tear…”

Julian Blake, counsel for the inquiry, asked Mr Sewell about the email and asked him whether this was “typical of the approach you have been taking to work?”

“No, no—I don't know why I wrote that,” replied Mr. Sewell. “I don't know, I don't know why I wrote that. I apologize.”

The Fujitsu director later admitted “we're all protective of our own companies” when pressed further on whether he thought it was important to protect the company's reputation.

After Mr Sewell's testimony, Castleton said: “They set out to destroy me, which they did, and it was groupthink – it wasn't just one person. They were a group of people and it was a case of 'sorry, not sorry'.” ' is not it?”

When asked if he had a message for Mr Sewell, he replied: “I hope you have sleepless nights like me.”

The latest revelation in the investigation came after Fujitsu told the government it would not bid for public contracts while proceedings into the Post Office scandal continue.

Minister Alex Burghart said the technology company had written to the Cabinet Office to inform it of its decision.

The government continued to award public contracts worth billions of pounds to Fujitsu even after information emerged about the scandal involving Horizon.

The Post Office, which is wholly owned by the government, is still using Horizon and has paid Fujitsu £95m to extend the system for another two years after abandoning plans to move to Amazon.

“This morning the Cabinet Office received a letter from Fujitsu voluntarily pledging not to bid for government contracts during the investigation, unless of course the government asks them to do so,” Burghart told the Commons on Thursday.

He made the statement after former minister Sir David Davis asked for companies such as Fujitsu to be banned from bidding for government contracts due to their “horrible performance records”.

The newspaper said that government lawyers said it would not be legally possible to discriminate against companies based on their record.

But Sir David told the Commons: “The government's lawyers advised that this could not be done. They are wrong.”

“So will the government think more seriously about preventing large companies like Fujitsu with terrible records from bidding for future contracts? And if necessary, legislate accordingly?” he asked.

At that point, Mr. Burghart announced that Fujitsu had voluntarily withdrawn from bidding for future government contracts.

He said the Post Office was aware of “bugs and errors” in the Horizon program early on. However, the Post Office continued prosecutions.

At a hearing before MPs, Patterson also said Fujitsu had a “moral obligation” to contribute to the compensation of subpostmasters who were wrongly prosecuted as a result of its faulty software.

Japan-based Fujitsu Group said on Thursday it would “work with the UK government on appropriate measures, including contributing to compensation.”

She added: “Fujitsu Group hopes to reach a quick solution that ensures a fair outcome for the victims.”