A former subpostmaster has said he wishes Paula Vennells would have recognised a decade ago that what happened to him and his Post Office colleagues was “unforgivable”.

Lee Castleton, who bought a Post Office in Bridlington in 2003, was found to have a £25,000 shortfall at his branch in 2004 and was made bankrupt after he lost his legal battle with the Post Office.

Ms Vennells, former Post Office chief executive, admitted that the treatment of the East Yorkshire subpostmaster was “unforgivable”, on her third day of her evidence to the Horizon IT inquiry.

The inquiry previously heard that during her time as the organisation’s network director, Ms Vennells “likely” signed off on his £300,000 trial bill.

She told the probe that the fact Mr Castleton was “locked out” of a mediation scheme for those who believed they had been wrongly prosecuted by the Post Office was “unacceptable”.

Asked how he felt about her comments, Mr Castleton told the PA news agency during a break from the hearing: “It’s a different world for me now. It’s 20 years on and we have had to fight so hard.

“I just wish she would have recognised that in 2013 – it would have made such a difference to a lot of people.

“It would have been so much better for everybody had the Post Office not done what they had done. There have been so many people punished for nothing.”

Asked if he thought Ms Vennells’ comments on his case had been forced, he said: “Kind of. If I ever believed that it was just about me, me personally, then I probably wouldn’t be here today. But I think it has been forced and we have had to fight every step of the way, and it never needed to be like this.”

Mr Castleton said his overwhelming feeling over the course of Ms Vennells’ evidence has been sadness, adding: “This never needed to happen to anybody.”

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On Friday, Edward Henry KC, a lawyer representing a number of subpostmasters at the Horizon IT inquiry, asked Ms Vennells: “You preach compassion, you don’t practice it. For example, with Mr (Lee) Castleton he was even closed out of the mediation process and you know why that was, don’t you?”

The former Post Office chief executive, who is also an ordained Anglican priest in the Church of England, replied: “I’m sorry, I cannot recall the detail of that.

“I wasn’t personally involved in which cases did or didn’t go into the mediation scheme.”

Mr Henry continued: “It so deeply moved you, you said in your statement, ‘it was so shocking’, yet he was locked out of the mediation scheme because… he was an illustrious scalp… that could be used in the GLO (group litigation scheme)?”

Ms Vennells said: “What happened to Mr Castleton is completely unacceptable.

“At the time his case was not taken through the scheme, I personally wasn’t involved in the decision, but the Post Office took the decision based on legal advice.

“It was wrong, Mr Henry, I completely agree with that – and what happened to Mr Castleton is unforgivable.”

Mr Henry went on: “You exercised power with no thought of the consequences of your actions despite those consequences staring you in the face?”

Ms Vennells replied: “The scheme was set up and for the time that I worked on that I believed… that we were doing the right things and clearly that was not always the case.

“We did look at the consequences and although that may have been misunderstood I circulated eight cases including Mr Castleton’s, it was an act of compassion and I was very moved by the content of that.”