Dreaming up iniquitous defences: why X v Y goes beyond pub talk

@Crimegirl has been posing a very entertaining series of tweets on the daft things clients do. This one is not the most entertaining one* but it caught my eye…


[* I think this one is the funniest one, should you be interested.]

The tweet was nearly perfectly timed to coincide with the publication of X v Y Ltd UKEAT/0261/17/JOJ, where Slade J in the Employment Appeal Tribunal, held that an Employment Judge had erred in interpreting an email in respect of which legal advice privilege was claimed. She found that the advice in the email was given for the purpose of facilitating an iniquity.  In her view, there was a strong case that the email gave advice on how to cloak what would otherwise be a disability discrimination dismissal as a dismissal for redundancy.

The case is a little difficult to interpret because we don’t have the benefit of the email yet (the case will go to a full hearing if it doesn’t settle). In broad terms, the email showed legal advice about how an individual who they wanted to fire for poor performance, but would struggle to do so because of the risk of disability discrimination, could be made redundant because of a serendipitous restructuring. On the judge’s interpretation, it has solutions-focused but ethically neutered lawyering written all over it. There was no apparent attempt in the email to advise on conducting the exercise unfairly. I set out a fuller consideration of judgment below the line.

For now, let us focus on what the judge concludes:

Advising that certain course of action runs a risk of being held unlawful whether the illegality be breach of contract, discrimination or even breach of fiduciary duty is not in itself iniquitous.  Giving advice that a certain course of action which may be unlawful could be taken shades into iniquity.  Advising how a fraud could be perpetrated as in Crescent Farms would clearly be an iniquity, as would advice on how to breach a fiduciary duty as in Gamlen.  However, advising termination which would be a breach of a notice provision in an employee’s contract may well not be relevant conduct usefully characterised by Norris J in BBGP Ltd paragraph 62 as going:

“… beyond conduct which merely amounts to a civil wrong; he has indulged in sharp practice, something of an underhand nature where the circumstances required good faith, something which commercial men would say was a fraud or which the law treats as entirely contrary to public policy. …”

…advice which could be construed as advice to commit the tort of discrimination, depending on the facts, may be different in degree from advice on how commit fraud or breach of fiduciary duty.  However, depending on the facts the discrimination advised may be so unconscionable as to bring it into the category of conduct which is entirely contrary to public policy.  In this respect I differ from the decision of the EJ in which he held at paragraph 85 that it goes too far to elevate the tort of discrimination “to the status required to disapply legal advice privilege”.  That may be an appropriate view in many cases but the facts of some discrimination may take advice on how to commit it into the category of advice which is contrary to public policy.

If the advice in the email of 29 April 2016 had gone no further than “you may select the Claimant, an employee with a disability, for redundancy but you run the risk of a claim by him” in my judgment it would not have reached the high threshold required to disapply legal advice privilege.  …In my judgment, properly interpreted, the email of 29 April 2016 records advice on how to cloak as dismissal for redundancy dismissal of the Claimant for making complaints of disability discrimination and for asking for reasonable adjustments which will continue if there is “ongoing employment”.  In my judgment a strong prima facie case has been established that what is advised is not only an attempted deception of the Claimant but also, if persisted in, deception of an Employment Tribunal in likely and anticipated legal proceedings.  The email does not record any advice on neutral selection criteria for redundancy.  It concentrates exclusively on how the redundancy can be used to rid the Respondent of ongoing allegations of discrimination by the Claimant and of underperformance which he stated are related to his disability and failure to make reasonable adjustments.  Whether the legal advice given was in fact to perpetrate or in furtherance of iniquity will be for the Employment Tribunal hearing the claim to which it relates to decide.

If one frames the case in the context of Crimegirls tweet it is fairly obvious that this was sufficiently serious to count as “iniquity”. Redundancy was, on the evidence as we have it, manufactured to defeat the claimant.  I note in passing, and with interest, that most lawyers commenting on the case have focused on the obvious confidentiality problem of talking about cases in the pub. They are either less concerned by, or unwilling to discuss publicly, the iniquitous use of legal advice.  There are a variety of possible explanations. One reason might be that the case shows how easy it would have been to give the same advice but in a more balanced way that would have made it less obvious that the advice was a cloak against an allegation of (as yet unproved) discrimination.

Another might be that lawyers don’t really understand the true rationale of legal professional privilege. To her credit, Slade J emphasises the public policy principles behind legal professional privilege. Importantly, she goes beyond the often made point that such privilege is necessary, “for a client to be open and frank with their legal advisors” to emphasise why this is necessary. It is this latter point which is so often forgotten when practitioners rush to defend legal professional privilege or forget the situations in which it is waived or lost. She cites Bingham LJ in Ventouris v Mountain [1991] 1 WLR 607:

“The doctrine of legal professional privilege is rooted in the public interest, which requires that hopeless and exaggerated claims and unsound and spurious defences be so far as possible discouraged, and civil disputes so far as possible settled without resort to judicial decision.  To this end it is necessary that actual and potential litigants, be they claimants or respondents, should be free to unburden themselves without reserve to their legal advisers, and their legal advisers be free to give honest and candid advice on a sound factual basis, without fear that these communications may be relied on by an opposing party if the dispute comes before the court for decision.  It is the protection of confidential communications between client and legal adviser which lies at the heart of legal professional privilege …” (my emphasis)

Advice sought or given for the purpose of effecting iniquity is not privileged because of the words in bold.  As the judgment makes plain it is sometimes referred to as the crime-fraud exception. It includes, “all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances” and “fraud” in this context is used “in a relatively wide sense”.  Whilst also requiring that, “what is prima facie proved really is dishonest, and not merely disreputable or a failure to maintain good ethical standards”, because, “legal professional privilege is a very necessary thing and is not lightly to be overthrown.” Fraud has included, “a scheme to effect transactions at an undervalue”; “deliberate misrepresentation for the purpose of securing a mortgage advance”; “making a disposition with the intention of defeating a spouse’s claim for financial relief” and, “establishment by employees, in breach of a duty of fidelity to their employer, of a rival business”. These examples are much more serious than merely mounting hopeless or exaggerated claims, so the protection the policy objective by lifting privilege for iniquity is modest. And in this case, we see what the judge seems to see the re-characterisation of this employees dismissal as something dishonest in intent. An interesting question is whether the courts might be tempted to draw a link between the iniquity test and the integrity test set out in Wingate and Evans recently. Whether they do or not, the case is a useful reminder that legal professional privilege should not be a cloak by which clients (and if they choose their lawyers) can indulge in manufacturing claims and defences. It is interesting that what sometimes appears easier to see in criminal defence is seen as less clear in offices dealing with the desires of corporations.

An interesting footnote is that the parties are anonymous in this report. This may be to protect the identity of the disabled claimant might not hold should the case go to a full hearing. But it also has the benefit of protecting the lawyers involved, some of whom appear to have breached their professional ethics in two senses: one through revealing confidential information in a public place and another through, potentially, having breached a broader raft of professional principles.  There may be a further breach if any of them continue to act because the anonymity protects them and they will now struggle to advise on settlement independently. They have an interest in settling which extends beyond the interest of their client or employer organisation: they get to keep their iniquitous conduct and loose talk in the pub secret.


A fuller consideration of the case should you be interested…

The email in question was, “from a member of the Respondent’s legal department to a solicitor seconded to the Respondent,” forwarded anonymously to the claimant who had also overheard a conversation in a pub from unidentified people au fait with the respondent’s legal strategy. The claim itself alleged disability discrimination and victimisation against a lawyer who’d been employed by the respondent for 27 years. He had Type 2 Diabetes and Obstructive Sleep Apnoea. And it is reported that from 2011 there were ongoing concerns about the Claimant’s performance at work.  The claimant was made redundant.

The pub conversation was claimed to be subject to legal professional privilege. It was reported as being between two professionally – dressed women in their 30s or 40s.  One mentioned dealing with a disability discrimination complaint by a senior lawyer at Y Ltd. She had reportedly said, “that there was a good opportunity to manage X out by severance or redundancy as there was a big reorganisation underway as a result of Y’s acquisition of another company.”

The Claimant relied on this conversation to interpret the anonymously sent email.  The email was marked “Legally Privileged and Confidential”. It was sent by, “A, a senior lawyer, to B, a lawyer assigned to the Respondent.” The judge declined to read out the full text because legal advice privilege is claimed. At first instance, the Claimant asserted, “the e-mail contains advice on how to commit unlawful victimisation by seeking to use (and ultimately using) the redundancy/restructuring programme as a cloak to dismiss the Claimant.” The Respondent denied this was the meaning of the email and also denied that, even if it was, it fell within the ambit of iniquity.

The claimant was alleging that, “seeking to disguise an act of victimisation or discrimination as a dismissal for redundancy [was a] …deceit falling within the iniquity principle.” Interestingly, part of the respondent’s case was this was the kind of advice employment lawyers gave every day, and was not sufficiently serious or iniquitous to allow what was a serious incursion into legal advice privilege.

The EJ held for the respondent that the email did not reveal unlawful victimisation or a cloak:

“It is legal advice aimed and [sic] avoiding rather than evading possible legal action (Bullivant) in place of simply doing nothing in fear that the Claimant might take further legal action.  This is what lawyers do day in day out and the giving of legal advice does not as a matter of course raise iniquity.”

And similarly, the judge at first instance also found against the claimant in respect of iniquity saying, “Whilst of course protection against discrimination and victimisation is important, it is a tort, and to elevate it to the status required to disapply legal advice privilege, goes too far.” The conversation in the pub remained privileged partly because it would only reveal a tort, even if even if discrimination is a tort to be viewed seriously.

Slade J disagreed comprehensively with this analysis.

She found a strong prima facie case that the email recorded advice for the purpose of victimising or discriminating against the Claimant. A strong prima facie case is the relatively high test necessarily to be part of the legal professional privilege to be lifted:

In the email A was relaying to B legal advice which she had given to C, a senior manager.  The advice was how to seize the opportunity of a redundancy exercise to dismiss the Claimant.  The redundancy exercise, if done carefully, could be used as a cloak to achieve this.  Mr Halliday submitted that the Respondent had already formed a wish to terminate the employment of the Claimant.

Whilst the employment judge was right not to use the pub conversation to interpret the email, the interpretation of the email at first instance was wrong. The email was specifically addressed at finding a way out of dismissing the claimant by other means (for poor performance, where the firm risked losing).

The key question in the interpretation of the email is whether the advice recorded simply points out the risk of claims if the Claimant were selected for redundancy or whether it goes further and advises that the redundancy can be used as a cloak for dismissing the Claimant who was troublesome to the Respondent because of his continuing allegations of disability discrimination.

If the Claimant were to be dismissed by proper application of a redundancy selection procedure there would have been no need to write that “there is at least a wider reorganisation and process at play that we could put this into the context of”.  Further, in a genuine redundancy dismissal, there would be no need to say “Otherwise we risk impasse and proceedings with ongoing employment with no obvious resolution”.  In my judgment these passages record advice that the redundancy situation can be used as a cloak for dismissing the Claimant for other reasons.

…In my judgment the email of 29 April 2016 is to be interpreted as recording legal advice that the genuine redundancy exercise could be used as a cloak to dismiss the Claimant to avoid his continuing complaints and difficulties with his employment which were said by him to be related to his disability.











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