Chief Executives Facing Mass Tort Claims Should Take Heed of the Lessons from the UK Post Office

ITV’s dramatization of the UK sub-postmasters scandal, Mr Bates vs the Post Office, provides a harrowing account of the difficulties faced by ordinary people when seeking collective redress for wrongdoing from well-resourced corporations. Whilst the claimants took solace from the courts uncovering the truth, the cost of litigation and the need to take on third-party funding means that to date justice has not been served.  

Last week, however, the public interest sparked by ITV’s drama lit a flame under the issue, putting it at the top of the political agenda and pilling pressure on the UK government, the ultimate owner of the Post Office, as well as Fujitsu, who’s faulty Horizon accounting software was at the heart of the issue. Whilst there is still work to be done, momentum is now behind the claimants and any further delay to a full and fair settlement is bound to lead to outrage.

The complex nature of class action cases means that they are always going to be lengthy and expensive to pursue. This allowed the Post Office to conduct a twenty-year war of attrition, depleting the financial resources and emotional resolve of the victims, even after it had been established that it was at fault.

The same tactics are sometimes deployed by natural resource companies facing claims for environmental damage. However, an ever more sophisticated network of opportunistic investors and advisers is starting to shift the balance away from the defendants and hold companies to account. The news in October last year that emerging markets investment manager, Gramercy, had invested £450 million in a UK law firm to pursue mass tort cases will have caused consternation in company board rooms, not least at Anglo-Australian mining company, BHP Biliton, which is defending a $36bn lawsuit from the firm.

Companies and advisers who have profited from polluting the atmosphere through carbon emissions are also set to face a reckoning. From December 2022, there have been 2,180 climate-related cases filed in 65 jurisdictions. This represents a steady increase from 884 cases in 2017 and 1,550 cases in 2020, according to a report on the status of climate litigation, published by the United Nations in July last year.

Driving the decision-making at the Post Office throughout the process was the need to protect its trusted “brand” from scandal, even if this came at huge personal expense to its employees. Their obstinate behaviour and the determination of the victims ultimately turned the issue into a blockbuster TV drama that will haunt the former CEO, Paula Vennells, forever.

While companies in the natural resource sector do not have the soft, cuddly image of the Post Office to lose, they still have stakeholders to manage and concessions to win in a competitive environment. Outstanding litigation for destroying lives and the environment is not going to improve their appeal to resource-rich governments and increasingly ESG-conscious investors. As a result, effective strategies to create pressure from outside the courtroom to do the right thing and settle outstanding tort cases could prove to be every bit as important for claimants and their financial backers as legal decisions. Chief Executives should take heed of the lessons from the Post Office and recognise that coming to the negotiating table early and in good faith might be the best way to protect their reputations, as well as long-term shareholder value.