Litigation funding and the Post Office scandal

New Scottish group action rules allow a type of case that may benefit from third party funding, but English litigation around the Post Office Horizon software shows there are many factors to consider.


February 2022 marked the start of the independent public inquiry to investigate the long running Post Office scandal, which has been described as “the most widespread miscarriage of justice in UK history”.

Cause of action

The inquiry is seeking to gather a clear account of the failings of the Horizon computer system used in Post Office branches from 1999, which led to the prosecution of 736 sub-postmasters and sub-postmistresses by the Post Office between 2000 and 2014, including many in Scotland, based on information from the Horizon system. Those prosecuted were given criminal convictions as it looked as if they were recording false accounting, stocktaking and transactions, with some shortfalls amounting to many thousands of pounds. As it turns out, it was the faulty computer system which was to blame.

The road to justice has been long. A campaign group, Justice for Sub-postmasters Alliance (JFSA), was set up in September 2009 to tackle the issue. In January 2012 the Post Office set up the Initial Complaint Review and Mediation Scheme, but terminated it in 2015 believing there was no evidence of any systemic issues with the computer system. Where did this leave the workers?

Many of those affected in England & Wales brought civil claims, including a group litigation by 555 sub-postmasters and sub-postmistresses raised in the High Court in March 2017. The Post Office workers received a funding package from a third party funder, which allowed the initial actions to be raised, and cases which might otherwise not have been taken to progress through the court system.

Indeed, the Post Office employed an aggressive legal strategy, rigorously defending the civil claims, dragging out the litigation and driving costs up, inevitably leading to a David versus Goliath scenario and increasing costs for all involved. Without the financial backing of the funder involved, the workers might not have been able to see the litigation to an end. The tide only began to turn in December 2019, when the High Court published its judgment in the group litigation, finding that many bugs, errors and defects were in the Horizon system. Following that judgment, the Post Office agreed to settle and pay £58 million in damages. Yet after legal costs were paid, only £12 million was left to be paid out to the claimants, an average of £20,000 each.

Further, despite its rigorous defence, the Post Office claimed it was unable to cover the compensation payments due to its workers and so the Government has agreed to foot the bill. However, the Government can’t step in to support private cases, and many do not go to court simply due to the financial costs of litigation.

Outcome

After the High Court ruling, the victims' sentences were reconsidered via the Criminal Cases Review Commission, and by the end of 2021, 72 postmasters' convictions had been quashed. Several other cases are in progress, and there are potentially hundreds more whose convictions relied on Horizon evidence and who may seek to have their convictions overturned.

Given the pivotal role the claimants played in bringing the scandal to light, a compensation scheme was also set up by the Government in March this year to ensure that those involved in the group action received the same level of compensation as those who were able to claim through the Historical Shortfall Scheme, a fund set up to compensate people affected but not convicted of crime.

Recoverability of costs

The recoverability of costs is another substantial factor in pursuing such a case, and that can cause undue stress on all involved. In Scotland there is currently no equivalent of summary assessment. Costs, or expenses, usually continue to run until the end of the case when a determination about overall success will be made. The process of recovery of expenses is subject to less management by the court than in England, where legal costs are also likely to be more significant.

Turning to Scotland, the landscape for multi-party actions and the funding of litigation has gone through significant change in the last couple of years with the introduction of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018, which introduced a mechanism for group claims in Scotland.

The 2018 Act

The Act allows for two or more people with the same, similar, or related claims, to raise court proceedings in a single action. For litigants, there are significant benefits in being able to raise an action in this way. The legal costs, time burden, and risk of being found liable for the opponent’s costs are shared among the group, rather than an individual having to shoulder this risk alone. Another benefit of group procedure is that group actions are more closely managed by the court and the presiding judge has a wide discretion to direct how a specific group action will run. This means that there is scope for greater efficiency in the litigation.


Finally, whereas a handful of individual actions may not be that daunting for a large corporate organisation, when those with a similar claim come together, there is clear strength in numbers.

Three well documented group actions have already been raised in Scotland since the inception of the new rules:

  1. The Volkswagen NOx litigation, which involves over 8,000 claimants all seeking justice for buying vehicles which contained defeat devices, which they say resulted in the emissions of NOx from their vehicles being above the relevant statutory limits.

  2. A claim against Celtic Boys Club by victims of alleged historical abuse.

  3. The Kenyan tea workers case, which involves hundreds of tea pickers who allege they have suffered musculoskeletal problems because of working conditions on farms run by a Scottish company, James Finlay (Kenya) Ltd.

These cases show the wide range of actions already being raised under the new rules and utilising the benefits of this new procedure.

From a Scottish perspective, prior to the introduction of the new rules a case such as the Post Office litigation would not have had the benefit of being raised as a group claim, making Scotland a less desirable forum. The introduction of the new provisions will inevitably make such cases a more viable proposition for potential litigants and funders to take on in Scotland, potentially at a lesser cost. Lessons should of course be learned from cases such as the Post Office, but collective redress and the use of appropriate third party funding is often the only way such cases can be raised and those involved can access justice.

The Authors Frances Sim WS is the general counsel for Restitution Ltd, a specialist provider of commercial litigation and dispute resolution funding, and a member of the Society of Writers to HM Signet. Alison Webb is a partner at PGMBM, a law firm specialising in group litigation, and leads its Scottish practice.

This article appeared in The Journal of the Law Society of Scotland on 11 May 2022: https://www.lawscot.org.uk/members/journal/issues/vol-67-issue-05/litigation-funding-and-the-post-office-scandal/

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