British American Tobacco secures protection in Canada case

British American Tobacco’s Canadian subsidiary has received creditor protection as it battles a ruling ordering cigarette firms to shell out 15.6 billion Canadian dollars (£8.8 billion) in a class action lawsuit.

BAT’s Imperial Tobacco Canada is liable for 9.2 billion Canadian dollars (£5.2 billion) of the suit, but on Wednesday it was granted protection under the Companies’ Creditors Arrangement Act (CCAA).

This, the firm said, has the effect of “staying all current tobacco litigation in Canada against Imperial Tobacco Canada and other group companies”.

Earlier this month, a Quebec court dismissed an appeal by BAT, Philip Morris and Japan Tobacco, which had challenged a judgment ordering them to pay the sum as part of a long-running court case brought by disgruntled smokers.

The ruling related to compensation for smokers suffering health problems. They allege the firms did not do enough to warn them of the risks of smoking.

BAT is the latest of the firms to gain protection.

If Imperial Tobacco Canada had not obtained court protection, it could have been required to pay for all or part of another tobacco company’s – JTI-Macdonald – share of the Quebec judgment, in addition to its own.

BAT said: “Imperial Tobacco Canada has informed us it disagrees with the court’s judgment.

“However, we understand CCAA protection will provide Imperial Tobacco Canada an opportunity to settle all of its outstanding tobacco litigation under an efficient and court-supervised process whilst continuing to run its business in the normal course.”

BAT has already said it will make a £436 million provision on its 2019 balance sheet as the recoverability of money put in escrow as part of the saga is not certain.