An MP has urged both the justice and business select committees to investigate the role of law firms – and in particular Herbert Smith Freehills (HSF) – in helping client companies accused of wrongdoing set up compensation schemes.
Conservative MP Kevin Hollinrake, co-chair of the All-Party Parliamentary Group (APPG) on Fair Business Banking, recommended that the justice select committee call HSF leaders to give evidence on its work.
In doing so, he has ramped up the pressure on the City giant, about which the APPG has already complained to the Solicitors Regulation Authority (SRA) over its work for Lloyds Banking Group on the Reading branch scandal.
As we reported earlier this month, that complaint concerns in part HSF’s work on the Griggs review, which dealt with compensating victims of the fraud but was ultimately deemed flawed and is now being re-run.
Mr Hollinrake said he was “astonished” that the firm was also advising the Post Office on its recently announced compensation scheme for subpostmasters who suffered a “shortfall” in using the flawed Horizon computer system that led to many being wrongly accused and convicted of theft.
HSF acted for the Post Office last year in settling group litigation brought by some of the subpostmasters. The firm denies any conflict of interest.
In his letter to justice select committee chair Sir Bob Neill MP, Mr Hollinrake said: “The mere fact that HSF acted on behalf of the Post Office in the legal action with the responsibility to minimise losses should prohibit them from taking any role in a compensation scheme.”
He continued: “What is clear is that corporations cannot behave in these unacceptable ways without the help of others, in this case their legal advisers…
“A short select committee inquiry into these matters would obviously give your committee the opportunity to question senior HSF personnel directly, which may be revealing.”
In his letter to Darren Jones MP, chair of the business, energy and industry strategy select committee, Mr Hollinrake urged it “to lead the calls for a proper compensation scheme” for the victims of the Post Office scandal.
In a statement, he added: “Whilst the APPG understands that a law firm has a duty to its client, it also has a duty to uphold the integrity and ethical standards of the legal profession and to not act in a way that facilitates or perpetuates injustice.
“Both the HBOS Reading fraud and the Post Office Horizon scandal are egregious cases… After years of denial and obfuscation, both Lloyds and the Post Office have been forced to remediate victims.
“However, rather than setting-up independent, fair and robust schemes, the APPG is concerned that it is deemed acceptable for the offenders to bring on board their existing legal advisers to advise on the design and, in the case of the Post Office, implement the scheme.”
Mr Hollinrake argued that HSF’s involvement in the scheme “is perverse and undermines any confidence that such scheme can deliver a fair outcome to applicants”.
He said both Lloyds and the Post Office had failed to consult with any of their victims before setting up the schemes.
An HSF spokeswoman said: “There is no conflict with the firm acting for the Post Office on this matter.”
A Post Office spokesman said: “The Post Office is resolving past issues in good faith. The historical shortfall scheme was established following the agreed settlement of the group civil litigation last year and founding principles were endorsed by the legal representatives for the claimants’ steering group.
“The scheme includes an independent advisory panel to assess cases and there is a dispute resolution procedure which includes independent mediation provided by the Wandsworth Mediation Service, chaired by Stephen Ruttle QC, who co-mediated the resolution of the group litigation.”
The scheme also has an independent advisory panel, including Alex Charlton QC, a barrister with particular expertise in software and IT systems.
The letter to Mr Neill recorded that HSF’s initial response to the APPG’s complaint “has been to simultaneously deny involvement with the Lloyds compensation scheme whilst defending the indefensible by pointing out its merits”.
Mr Hollinrake claimed to have “indisputable evidence” of HSF’s involvement in the Lloyds scheme.
The HSF spokeswoman said: “We are aware of the SRA complaint and, while we are unable to comment on the detail of it, we are very confident in our position. We look forward to assisting the SRA with their enquiries, which are at an early stage.”
More broadly, Mr Hollinrake said the UK should adopt a policy similar to Australia’s ‘model litigant rules’, which set a standard of good conduct for cases in which there is such a disparity of power in litigation.
Originally introduced for government departments, he said they have been adopted by banks too.
Such rules should include “a strict protocol for the establishment of compensation schemes that precludes the involvement of advisors to the wrong-doer”, he added.