BAT to cough up bil­lions in Canada for tobacco suit

CityPress - - Business - Maake

In one of the largest awards against big tobacco, the jewel in Reinet In­vest­ments’ crown has just been hit with an or­der to pay bil­lions in moral and puni­tive dam­ages for en­dan­ger­ing smok­ers in Canada, but has made no pro­vi­sion for the pay­ment.

So con­fi­dent was Bri­tish Amer­i­can Tobacco (BAT) – in which busi­ness ty­coon Jo­hann Ru­pert’s Reinet has a sig­nif­i­cant in­ter­est – of win­ning the 17-year-old lit­i­ga­tion con­cluded in De­cem­ber, that it only planned to make pro­vi­sion for it when it be­came likely that there would be an “un­favourable out­come” and the amount could rea­son­ably be es­ti­mated.

BAT is Reinet’s sin­gle largest in­vest­ment, rep­re­sent­ing al­most 73% of Reinet’s net as­set value by March last year, its lat­est re­ported pe­riod. It is a lu­cra­tive in­vest­ment, with Reinet re­ceiv­ing div­i­dends of £106 mil­lion (R2 bil­lion at the cur­rent ex­change rate) from it last year.

“Judg­ment is an­tic­i­pated in 2015 and is ap­peal­able,” it said on pub­li­ca­tion of the re­port last year.

But on Mon­day, Judge Brian Rior­dan of the Que­bec Su­pe­rior Court in Canada, in two class ac­tions, found BAT sub­sidiary Im­pe­rial Tobacco, along with two tobacco man­u­fac­tur­ers, guilty of fail­ing in their gen­eral duty not to cause in­jury to an­other per­son and fail­ing to in­form cus­tomers of the dan­gers of their prod­ucts be­tween 1950 and 1998.

He levied C$1.2 bil­lion (R11.8 bil­lion) – ex­clud­ing in­ter­est – in moral and puni­tive dam­ages against all three com­pa­nies, ap­por­tioned in terms of each com­pany’s mar­ket share. But Im­pe­rial’s at­tempts to block cer­tain doc­u­ments from be­ing in­tro­duced into ev­i­dence prompted the judge to in­crease its share of the dam­ages.

This means BAT’s sub­sidiary has to pay dam­ages of C$10.4 bil­lion when in­ter­est is in­cluded.

News of the rul­ing shaved 2.41% off BAT’s share price in Lon­don trad­ing on Tues­day, and it was down 1.66% in Jo­han­nes­burg.

Rior­dan threw a span­ner in BAT’s works when he also ruled the tobacco com­pa­nies should pay part of the dam­ages within 60 days of his judg­ment if they planned to ap­peal.

He said it was “high time” the com­pa­nies started to pay for their sins and the plain­tiffs re­ceived some re­lief for the fi­nan­cial bur­den of bring­ing them to jus­tice af­ter so many years. Im­pe­rial’s share is C$743 mil­lion. BAT spokesper­son Will Hill said be­ing re­quired to pay such a sum to ex­er­cise the legal right to ap­peal was “un­prece­dented and egre­gious”, and it was not clear to him why Im­pe­rial was asked to pay it when the largest pro­vi­sional ex­e­cu­tion or­der en­forced in a Que­bec class ac­tion to date had been just C$50 000.

He said Im­pe­rial ad­vised BAT that there were very strong grounds for an ap­peal against the judg­ment as well as the pro­vi­sional ex­e­cu­tion or­der, and this chal­lenge would be lodged within the next month.

“Legal tobacco man­u­fac­tur­ers should not be held accountable for adult con­sumers’ per­sonal choice,” said Hill.

By De­cem­ber, BAT had an amount of £488 mil­lion recorded in its an­nual re­port un­der “other pro­vi­sions for li­a­bil­i­ties and charges”. This was split be­tween charges for busi­ness re­struc­tur­ing, em­ployee benefits, a li­a­bil­ity recog­nised for toxic chem­i­cal cleanups and “other pro­vi­sions”.

Th­ese other pro­vi­sions in­clude dis­putes. The recorded amount of £184 mil­lion is far short of the amount BAT’s sub­sidiary must pay if it wants to ap­peal.

The an­nual re­port shed no light on the legal fees Im­pe­rial spent de­fend­ing the case, and Hill did not re­spond to ques­tions on this score.

THE CASE

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