LAWYERS (& OTHERS) – WHY YOU SHOULD WATCH WHAT YOU SAY IN THE PUB: LEGAL PROFESSIONAL PRIVILEGE OUSTED BY INIQUITY OF ADVICE GIVEN

In the judgment today in X v. Y Ltd (PRACTICE AND PROCEDURE – Disclosure) [2018] UKEAT 0261 Mrs Justice Slade held that an email  marked “Legally Privileged and Confidential” did not have the protection of professional privilege.  The judgment also shows the dangers of having conversations that can be overheard in a pub (or anywhere for that matter).

“It is also well established and agreed between the parties that “advice sought or given for the purpose of effecting iniquity is not privileged”

THE CASE

X is a solicitor.  He submitted a claim to the employment tribunal on the grounds that he had been subject to disability discrimination.   The respondent embarked on a program of redundancy and X was placed in the redundancy process.

The conversation in the pub

Whilst X was in a pub (The Old Bank of England pub on Fleet Street) he overheard a conversation whereby his employers planned to “manage out” an employee who had brought a disability discrimination complaint by using severance or redundancy

The email

X was later sent, anonymously,  a copy of an email through the post.  That email was marked “Legally Privileged and Confidential” (the precise terms of the email are not in the judgment).  However it was summarised by the employment judge.

“the Claimant asserts that 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. As such, the Claimant submits it is not protected because it falls foul of what is called the iniquity principle. The Respondent’s position is that even if this interpretation of the e-mail is true, which it denies, it does not fall within the ambit of iniquity and is therefore is [sic] privileged.”

WAS THE EMAIL PRIVILEGED?

The Employment Judge, at first instance, held that the email was privileged.   The claimant’s appeal on this issue was successful. The email went beyond giving legal advice because it was also attempting to use a genuine redundancy exercise as a cloak to avoid the claimant’s discrimination claims.

    1. The EJ did not take into account the overheard conversation at the pub in May in deciding on the proper interpretation of the email of 29 April 2016. In my judgment he was right not to do so principally for the reasons advanced by Miss Romney QC in her skeleton argument. Counsel submitted that the conversation was rightly not relied upon as it was unauthorised by the Respondent and therefore could not assist in deciding their position and because there was no contemporaneous note taken of what was said.
    2. The overheard conversation took place about three weeks after the email of 29 April 2016 was written. The speaker was not identified and no contemporaneous note was made of what was said. In such circumstances it would have been unsafe for the EJ to rely on evidence of the overheard conversation to interpret a document written about three weeks earlier.
    3. Mr Halliday relied upon paragraph 40 of the judgment of Lord Neuberger in Airtours Holidays Transport Ltd v Revenue and Customs Commissioners [2016] 4 WLR 87 to support the proposition that the interpretation of a document is a question of law. Miss Romney QC contended that the interpretation of the email of 29 April 2016 could only be challenged on perversity grounds.
    4. Lord Neuberger in Airtours held at paragraph 40:

“… In the end, we are concerned with the interpretation of a document, and it is well established that that is a matter of law, not fact, in the courts of all parts of the United Kingdom. Of course, where there are relevant findings of primary fact (or even, at least in some cases, of secondary fact) relevant to interpretation, a Tribunal’s finding will deserve particular respect, but that does not arise in this case. …”

    1. In this case the Claimant placed some reliance on external facts to assist in interpretation of the email of 29 April 2016. These included that the Claimant had lodged the ET1 alleging disability discrimination and had raised a grievance. This was relied upon to interpret “proceedings with ongoing employment with no obvious resolution”. The Claimant’s case was that the meaning of the email was that redundancy could be used as a guise under which to dismiss the Claimant for other reasons. Reference was made to the fact that the Respondent had ongoing concerns about the Claimant’s performance at work and that he had been given low Individual Performance Ratings. The Claimant attributed his difficulties to his disabilities and the failure by the Respondent to make reasonable adjustments. This background was relied upon to assist in interpreting the email of 29 April 2016 as recording a device to fulfil a long held wish to dismiss the Claimant.
    2. In my judgment both the EJ and the Claimant relied upon external facts to interpret the email of 29 April 2016. In those circumstances, applying the approach of Lord Neuberger in Airtours the interpretation of the email is a matter of law but where, as in this case, external facts are relied upon to interpret the document the Tribunal’s finding deserves particular respect. Even if such an approach could be described as applying a perversity test as contended by Miss Romney QC such a challenge is made in the Notice of Appeal.
    3. The competing contentions of the parties as to the interpretation of the email of 29 April 2016 are straightforward. For the Respondent it is said that, as the EJ found, the email disclosed advice given in the context of reducing the overall numbers of lawyer roles. Insofar as it referred to an individual, assumed to be the Claimant, the email recorded the type of advice given by lawyers day in and day out. It did no more than record advice that consideration could be given to applying the redundancy process to the Claimant in respect of whose performance there had been concern. The reference to proceedings was to the risk of future complaints and proceedings. A lawyer could be expected to give advice that a particular course of action could give rise to proceedings. That did not amount to advice to act in an underhand way.
    4. The first paragraph of the email appears innocuous. It sets out the background that as part of an integration programme and generally the Respondent was looking to reduce the overall number of senior lawyer roles. However the email does not record any general advice on selection for redundancy such as would be expected to be given for such an exercise. Instead the second paragraph of the email moves the focus to “the individual”, assumed to be the Claimant. The advice recorded in the second paragraph is concerned with how to deal with him. The writer records that the redundancy exercise provided “their best opportunity” of applying processes to the legal population including the individual, the Claimant. There would have been no need to make reference to “the individual” or to the risk that “he” and not lawyers generally would argue unfairness/discrimination. In the absence of any other explanation the reference to risking impasse and proceedings with ongoing employment is a reference to the Claimant.
    5. 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.
    6. 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.
    7. Mr Halliday contended that on a proper interpretation of the email the “other reasons” were or included the First Claim made by the Claimant for disability discrimination. In my judgment the reference to proceedings is to future proceedings if employment were to continue, not to past proceedings. Against the background of a claim of disability discrimination having been made, a grievance raising disability issues and issues over performance said by the Claimant to be attributed to his disability and his allegation of the Respondent’s failure to make reasonable adjustments, the risk referred to in the email was of future complaints of disability discrimination.
    8. 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.
    9. The structure and language of the email of 29 April 2016 leads to the conclusion that the EJ erred in his interpretation. If it is appropriate to use the term in the interpretation of a document, the interpretation by the EJ of the email was perverse.
Ground 2
The Tribunal erred by holding that victimising or discriminating against the Claimant by dismissing him was insufficiently serious to count as relevant “iniquity”
    1. It was agreed that the email of 29 April 2016 from A to B was subject to legal advice privilege. It recorded legal advice given by A, a solicitor, to the Respondent. In-house legal advice is protected from disclosure in the same way as legal advice from an external solicitor.
    2. Both parties agreed, as is well established, that legal advice privilege is based on public policy. It is in the interests of the public and the administration of justice for a client to be open and frank with their legal advisors so that soundly based legal advice can be given without the concern that it could be made public. That principle has been explained in many authorities. Perhaps the most cited is that of Bingham LJ (as he then was) in Ventouris v Mountain [1991] 1 WLR 607 at page 611C-D in which he explained:

“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 …”

    1. It is also well established and agreed between the parties that “advice sought or given for the purpose of effecting iniquity is not privileged“.Barclays Bank plc v Eustice [1995] 1 WLR 1238 at 1249C is frequently cited for this proposition (“the iniquity principle”). The burden of proof is on the party seeking to establish that the relevant facts fall within the iniquity principle. Both parties argued the appeal on the basis that the standard of proof is whether there is a “strong prima facie case” (albeit the Claimant reserved its position to argue, in any further appeal, that the test is simply a “prima facie case”).
    2. It must be borne in mind that even if privilege is lost because the iniquity principle applies to the legal advice in issue that is not determinative of whether the advice given was in fact to perpetrate or in furtherance of iniquity. The prima facie case which led to its disclosure whether strong or of a lesser standard is just that. The strong prima facie case is not determinative of the issue of whether the legal advice given was to perpetrate or in furtherance of iniquity. That decision would be for the court or tribunal determining the claim to which the disclosed material relates, in this case the Second Claim which is for disability discrimination and unfair dismissal.
    3. The issue between the parties on appeal is whether the EJ erred in deciding the Claimant had not established a prima facie case or a strong prima facie case that the email of 29 April 2016 fell within the iniquity principle so that legal advice privilege was lost.
    4. The parties also agreed that Eustice and BBGP Ltd applied to the issue of iniquity in the circumstances before the EJ. Where counsel diverged was on their analysis of the type of conduct properly categorised as iniquity. On this question counsel relied on different authorities.
    5. The EJ referred to Eustice in paragraph 44 of his judgment. However the passage he set out was from page 1238 which quoted the public interest principle clearly articulated in the judgment of Bingham LJ in Ventouris set out above.
    6. The EJ summarised the facts in Eustice in paragraph 45 of his judgment. The facts:

“… involved a case where a solicitor’s advice regarding disposing of property at an undervalue was held to fall within the exemption of privilege (referred to a iniquity). … in Eustice there was an allegation that the legal advice was sought to frustrate the mortgagee’s rights to the property because the mortgagors regarded the mortgagee bank as interfering with family assets, a situation which the Respondent states is miles away from the one in the present case.”

    1. The relevant passage in Eustice dealing with iniquity is that in the judgment of Schiemann LJ at page 1249B-H in which he held:

“It will be noted that in the last sentence cited Bingham LJ referred to the “absence of iniquity.” In so doing he was recognising the effect of a line of cases which have established that advice sought or given for the purpose of effecting iniquity is not privileged. The present appeal is concerned essentially with the question whether the effecting of transactions at an undervalue for the purpose of prejudicing the interests of a creditor can be regarded as “iniquity” in this context. “Iniquity” is I believe, without having done any research on the point, Bingham LJ’s word. The case law refers to “crime or fraud” (Reg v Cox and Railton (1884) 14 QBD 153, 165), “criminal or unlawful” (Bullivant v Attorney-General for Victoria [1901] AC 196, 201), and “all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances” (Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 553, 565). The case law indicates that “fraud” is in this context used in a relatively wide sense. Thus in Gamlen Chemical Co (UK) Ltd v Rochem Ltd (unreported), 7 December 1979; Court of Appeal (Civil Division) Transcript No. 777 of 1979 Goff LJ cited and approved a passage in the judgment of Goulding J in the court below [1983] RPC 1, 8, where he had said in the in the language of an age which has passed:

“For servants during their employment and in breach of their contractual duty of fidelity to their master to engage in a scheme, secretly using their master’s time and money, to take the master’s customers and employees and make profit from them in a competing business built up to receive themselves on leaving the master’s service, I would have thought that commercial men and lawyers alike would say that that is fraud.”

On the other hand the courts have shown themselves reluctant to extend the concept indefinitely and have warned against the indiscriminate setting aside of legal privilege. Thus in the Gamlen case, 7 December 1979 Goff LJ stated:

“the court must in every case, of course, be satisfied that what is prima facie proved really is dishonest, and not merely disreputable or a failure to maintain good ethical standards and must bear in mind that legal professional privilege is a very necessary thing and is not lightly to be overthrown, but on the other hand, the interests of victims of fraud must not be overlooked. Each case depends on its own facts.”

In Crescent Farm (Sidcup) Sports Ltd v Sterling Offices Ltd [1972] Ch 533 the court was not willing to extend the concept to the tort of inducing a breach of contract.”

    1. The relevant passage in BBGP Ltd is in paragraph 62 of the judgment of Norris J and was set out by the EJ in paragraph 50 of his judgment. Norris J held:

“Although the case law refers to crime or fraud or dishonesty (such as fraudulent breach of trust, fraudulent conspiracy, trickery or sham contrivances) it is plain that the term “fraud” is used in a relatively wide sense: Eustice‘s case [1995] 1 WLR 1238, 1249D. So a scheme to effect transactions at an undervalue was sufficient (Eustice‘s case); as was deliberate misrepresentation for the purpose of securing a mortgage advance (Nationwide Building Society v Various Solicitors [1999] PNLR 52, 72); or making a disposition with the intention of defeating a spouse’s claim for financial relief (C v C (Privilege) [2008] 1 FLR 115); or the establishment by employees, in breach of a duty of fidelity to their employer, of a rival business: Gamlen Chemical Co (UK) Ltd v Rochem Ltd (No 2) (1979) 124 SJ 276 and Walsh Automation (Europe) Ltd v Bridgeman [2002] EWHC 1344 (QB). The enumeration of examples is useful only in so far as it enables some underlying theme or connectedness to be identified. In each of these cases the wrongdoer has gone 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. (I borrow language from Gamlen and from Williams v Quebrada Railway Land and Copper Co [1895] 2 Ch 751.)”

The iniquity in BBGP Ltd was that the material for which privilege was claimed included advice regarding a plan to remove for cause a party to a dispute who was a partner and thus deprive it of compensation together with either covert plans. Norris J held that conduct of that character was sufficient to engage the iniquity principle.
    1. Mr Halliday submitted that the EJ erred when focussing his attention on whether the torts of disability discrimination and victimisation which were the subject of the email of 29 April 2016 constituted iniquity for the purpose of disapplying legal advice privilege. Counsel contended that the proper approach was to look at the seriousness of the conduct suggested in the email: dismissing the Claimant for matters related to his disability under the cloak of redundancy.
    2. Mr Halliday submitted that it is established that discrimination is a great evil and contended that deception in disguising it under a cloak of legitimate action is an iniquity for the purposes of excepting the privilege attached to legal advice. Counsel referred to Mezzotero. Under consideration in Mezzotero was protection from disclosure of “without prejudice” settlement discussions not legal advice privilege. However counsel contended that the observations of Cox J of the importance of having discrimination claims properly determined are equally applicable to legal advice privilege. In Mezzotero the Employment Appeal Tribunal held that the ET had not erred in holding that the Claimant could give evidence for the purposes of her complaints of sex discrimination and victimisation that at a meeting said by the employers to be “without prejudice” they had suggested that her employment be terminated by mutual agreement after she had raised a grievance about her treatment on returning from maternity leave. In the course of her judgment in the EAT Cox J held:

“35. … The sex and race discrimination legislation seeks to eradicate what the Court of Appeal have referred to as the ‘very great evil’ of discrimination – see Jones v Tower Boot [1997] IRLR 168, and I consider that it is very much in the public interest that allegations of unlawful discrimination in the workplace are heard and properly determined by the employment tribunal to whom complaint is made, as the appropriate forum under the legislation. Further, it is widely recognised that cases involving allegations of sex and race discrimination are peculiarly fact-sensitive and can only properly be determined after full consideration of all the facts – see Anyanwu v South Bank Students’ Union and South Bank University [2001] IRLR 305, and in particular the speeches of Lord Hope and Lord Steyn.”

Counsel submitted that there is a public interest in having discrimination cases heard with all relevant evidence. The iniquity evidenced in the email of 29 April 2016 is seeking to disguise an act of victimisation or discrimination as a dismissal for redundancy. This is a deceit falling within the iniquity principle. To preserve privilege in the email would be to withhold important evidence of discrimination and victimisation.
    1. It was submitted that the EJ erred in holding that the Claimant failed to establish a prima facie case of iniquity let alone a strong prima facie case. Counsel rightly concentrated his submissions on the existence of a strong prima facie case.
    2. Miss Romney QC contended that the authorities established two categories of iniquity which lead to the loss of legal advice privilege. There are cases involving the preservation of property and those concerned with the duty of good faith and fiduciary duties.
    3. Miss Romney QC referred to the contention on behalf of the Claimant before the EJ recorded at paragraph 76 of the judgment that there was an element of dishonesty in this case in concealing victimisation under the cloak of redundancy.
    4. Miss Romney QC submitted that there has to be some understanding and clarity over where the boundary of iniquity lies. Counsel contended that disguising a breach of a fiduciary duty is different from disguising a breach of mutual trust and confidence in an employment relationship. Gamlen Chemical Ltd v Rochem Ltd (No 2) [1979] 124 SJ 276 and Walsh Automation (Europe) Ltd v Bridgeman [2002] EHWC 1344 were examples of misconduct of a much more serious nature, diverting clients and trade secrets which was akin to fraud whereas breaching employment law provisions was of a significantly lesser category of wrong.
    5. Miss Romney QC submitted that the Claimant was seeking to extend the scope of iniquity beyond that to which it should apply. Counsel referred to reference by Norris J to examples of wrongdoing which had been held to constitute iniquity so as to negate legal advice privilege. Norris J observed that in such cases the wrongdoer had gone beyond conduct which merely amounted to a civil wrong. The wrongdoing had to amount to a fraud or something which the law treats as entirely contrary to public policy.
    6. Counsel referred to Crescent Farm (Sidcup) Sports Ltd v Sterling Offices [1972] Ch 553 at page 565 in which the Court of Appeal held that the tort of inducing breach of contract or conspiracy as pleaded in that case did not fall within the ambit of fraudulent conduct, trickery and sham contrivances constituting iniquity for the purpose of applying the iniquity principle.
    7. Miss Romney QC cautioned against widening the scope of “iniquity” for the purpose of disapplying legal advice privilege. Simon Brown LJ (as he then was) emphasised in Fazdil-Alisajeh v Nikbin The Times 19 March 1993 that there are “powerful policy reasons for admitting in evidence as exception to the without prejudice rule only the very clearest of cases”. Miss Romney QC contended that the torts of disability discrimination and victimisation were not such a case. They were not akin to fraud or conduct attracting the degree of opprobrium which has led to conduct being categorised as iniquitous.
    8. It was submitted on behalf of the Respondent that the content of the email of 29 April 2016 recorded no more than the type of advice solicitors frequently give to clients. The email suggested there could be consideration given to avenues available to achieve a resolution of ongoing difficulties with an employee. Committing an act of discrimination or victimisation may be a deplorable tort but it does not amount to iniquity. It was submitted that the EJ did not err in paragraph 86 of his judgment in which he declined to categorise actions relating to tortious claims as falling within the iniquity principle.
Discussion and Conclusion
    1. The question of whether the legal advice recorded in the email of 29 April 2016 was given for the purpose of facilitating an iniquity was rightly decided by the EJ on the basis of his interpretation of the email. He concluded in paragraph 84 that:

“… At its highest, the e-mail discloses advice on how to handle a possible redundancy of the Claimant as part of a UK wide process by which it would be reducing the number of lawyers it employed and acknowledges the risk that the Claimant might take legal action but points to the wider context as in effect justification. …”

Advising that taking a 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. …”

    1. Without seeking to diminish the opprobrium which Cox J attached to discrimination in Mezzotero, in my judgment 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.
    2. 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. The EJ reached his decision based on such an interpretation. However I have held that the EJ erred in doing so. 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.
    3. It is for a party seeking to rely on material in respect of which legal advice privilege is claimed to establish a strong prima facie case of iniquity. Norris J observed in BBGP Ltd at paragraph 73 of the Claimants’ need to establish a strong prima facie case of iniquity upon the facts of the case. The public interest and public policy considerations in maintaining privilege in advice given by a legal adviser to a client is long established. A strong prima facie case has to be established of an iniquity which reaches the high threshold of something of an underhand nature which is entirely contrary to public policy. Each case depends on its own facts. This case depends on a proper interpretation of the email of 29 April 2016. In my judgment the advice recorded in the email crosses the high bar of a strong prima facie case of iniquity.
    4. Although of significantly lesser importance, lest there be any doubt about whether legal advice privilege can be claimed in respect of the overheard conversation in the pub in May 2016, it cannot.
Disposal
  1. Both grounds in the Notice of Appeal succeed.