The UK Post Office scandal – the cost of justice

The ITV drama Mr Bates vs The Post Office, which tells the story of the British Post Office scandal, is the UK’s most watched programme of 2024 and ITV’s biggest new drama in over a decade.

This compelling David and Goliath tale of a 20-plus year battle for justice by a group of sub-postmasters wrongly accused of theft, false accounting and fraud is based on a true story described by UK Prime Minister Rishi Sunak as “one of the greatest miscarriages of justice in our nation’s history”.

The scandal has cost lives, caused individual financial ruin and stained personal reputations. There have been calls for individuals who held positions of responsibility at the Post Office to be charged with corporate manslaughter.

For directors, Mr Bates vs The Post Office is a salient lesson in boardroom failure that was decades in the making. About 80 directors passed through the Post Office board during the time the scandal slowly unfolded, including some high-profile names in UK governance who have gone on to serve on the boards of other significant entities.

There is, of course, the inevitable inquiry. The Post Office Horizon IT Inquiry led by retired High Court judge Sir Wyn Williams has been trying to get to the truth since it launched in 2020. The inquiry has entered phases five and six, examining issues including governance, redress and whistleblowing. Not surprisingly, one of the areas the Inquiry is tasked to look into is the Post Office’s conduct in regard to the group litigation.

After enduring decades of stonewalling, obfuscation and allegations at the hands of a UK government-owned entity, a group litigation launched on behalf of 555 sub-postmasters finally went to trial in England’s High Court, and after much legal manoeuvring eventually won an out-of-court settlement for their wrongful convictions of £58 million, as well as the right to appeal those convictions. After the significant legal costs involved were settled, the postmasters received about £20,000 each.

I don’t think there can be any dispute the sub-postmasters would never have seen the inside of a courtroom without the support of UK litigation funder Therium. In return for a share of any proceeds, Therium agreed to pay the legal costs and shoulder the other substantial risks of the class action, including paying costs if the case was lost.

The Post Office scandal can be viewed as an illustration of litigation funding’s noble purpose. The sub-postmasters didn’t have the skills or funds to undertake the case alone; the support of a litigation funder unlocked the opportunity for them to take their case. It makes sense that funders are only likely to be interested in – and fund – deserving cases and it would be hard to find a better example.

It’s easy to be critical of how little was left in the pot for the sub-postmasters but as a Therium investment officer put it, the costs ended up the way they did because of the defendant’s “scorched earth” approach to the litigation.

The reality is the Post Office used its size, financial resources and political influence to cover up wrongful conduct for more than a decade. It consistently refused to acknowledge its wrongdoing or provide financial compensation to its victims.

Its conduct during the various legal proceedings was characterised by delay and disruption, which ultimately clocked up further legal costs. It even tried, unsuccessfully, to have the judge recuse himself.

For his part the judge noted, “The Post Office’s approach to evidence, even despite their considerable resources which are being liberally deployed at considerable cost, amounts to attack and disparagement of the claimants individually and collectively. . .”

This type of conduct can be seen as abusive. Yet a defendant using size, influence and financial resources to bully a plaintiff to either settle cheaply or drop their legal action altogether is unfortunately not uncommon. Nor is a ‘deny, delay, defend’ approach which seeks to make the prospect of any meaningful outcome feel so remote to plaintiffs they just give up.

That didn’t occur in the case of the Post Office plaintiffs because litigation funding enabled them to match the defendant’s financial resources and stay the course. Of course, their win was much more than just money, it was their opportunity to hold the Post Office to account, have their side of the story told, and finally clear their names.

In New Zealand, it’s possible to see parallels with the Mainzeal case where the founder of local litigation funder LPF Group, Phil Newland, is on record saying that achieving a legal outcome took three times longer and was three times more expensive than anticipated because the directors and their insurer prolonged the case by deciding to fight every point and appeal in every New Zealand court “with no regard to the merits”.

If the defendant’s litigation strategy is to force the plaintiffs to spend more and more money on lawyers and litigation funders, it’s difficult to see how they can raise concerns at the end about how the plaintiffs haven’t received all of the proceeds of the case. It implies it is somehow the fault of the plaintiffs’ lawyers or funders that it has taken so long to resolve.

There’s no doubt that when things get litigious, positions become entrenched. Executive teams can feel under attack and there can be a tendency to want to dig in and fight. The involvement of a litigation funder may even amplify that reaction.

However, an important role and responsibility of governance in this situation is to be a considered and dispassionate voice of reason; to make a truly independent assessment of the situation.

That could, and possibly should, involve the board seeking its own independent legal advice about the merits of the case, which shouldn’t just be about whether the case is winnable. It should include an assessment of what’s the right thing to do. Where parties have been wronged, it should consider the organisation’s responsibility to address that wrong.

There should also be a careful weighing-up of broader factors, particularly the potential for reputation damage. How many organisations have doggedly won the legal battle only to find they have lost miserably in the court of public opinion? The Post Office manged to lose both the legal case and its reputation.

Many questions remain about the role of the numerous directors who oversaw the Post Office saga as it slowly unfolded. These will perhaps be answered over time, but maybe the more important question is, ‘Where are those directors now?’ – because it would be foolish to think the governance failings that enabled the Post Office scandal only existed there, wouldn't it?