In a recent decision, the Employment Appeal Tribunal (EAT) found that an email containing advice from an in-house lawyer was not protected by privilege due to the “iniquity principle”, as there was a strong prima facie case that it advised on how to “cloak” as dismissal for redundancy the claimant’s dismissal resulting from allegations of disability discrimination and victimisation: X v Y Ltd [2018] UKEAT 0261_17_0908.

It is well established that the iniquity principle prevents the application of legal professional privilege where advice is given for the purpose of facilitating crime or fraud. Fraud for these purposes has been interpreted to include “sharp practice”, or conduct which commercial people would say was a fraud, or which the law treats as entirely contrary to public policy (see for example this post). It would not normally include conduct which merely amounts to a civil wrong, ie a tort, nor does it cover conduct which amounts to a breach of fundamental human rights (see this post).

In the present case, it appears to have been key to the EAT’s decision that (on a strong prima facie case) the advice was an attempt to deceive both the claimant and, ultimately, an employment tribunal. The EAT left open whether advice to commit the tort of discrimination would, in itself, engage the principle, saying that such advice “may be different in degree” from advice on how to commit fraud or breach of fiduciary duty but, depending on the facts, “may be so unconscionable as to bring it into the category of conduct which is entirely contrary to public policy”.

Background

The claimant was employed by the respondent as a lawyer until he was dismissed on 31 January 2017. During his employment the claimant made allegations of disability discrimination against the respondent, including by bringing a claim in the employment tribunal in August 2015. From April 2016 the respondent conducted a programme of voluntary redundancy.

On or about 19 May 2016 the claimant overheard a conversation in a pub in which, as the employment tribunal found, a woman mentioned that a lawyer at the respondent company had brought a disability discrimination complaint and that there was a good opportunity to manage him out by severance or redundancy as part of an ongoing reorganisation.

In October 2016 the claimant was sent, anonymously, a print out of an email dated 29 April 2016, which was marked “Legally Privileged and Confidential” and was sent from one in-house lawyer at the respondent to another. The claimant alleged that the email contained advice on how to commit victimisation by seeking to use (and ultimately using) the redundancy / restructuring programme as a cloak to dismiss the claimant. Accordingly, he argued, it was not protected by privilege due to the application of the iniquity principle.

Shortly afterward, the respondent terminated the claimant’s employment by three months’ notice, allegedly by reason of redundancy. In March 2017, the claimant brought a second claim in the employment tribunal alleging further disability discrimination, victimisation and unfair dismissal.

The employment judge found that privilege in the email had not been displaced by the iniquity principle. He rejected the claimant’s argument that, on its proper interpretation, the email recorded advice about how to dismiss the claimant dishonestly or because of discrimination / victimisation. He found that, at its highest, the email gave advice on how to handle a possible redundancy of the claimant as part of a UK wide process, and acknowledged the risk that the claimant might take legal action but pointed to the wider context as in effect justification. In any event, the employment judge rejected the submission that advice on the commission of the tort of discrimination would be sufficient to engage the iniquity principle.

The claimant appealed on both aspects of the decision.

Decision

The EAT (Slade J sitting alone) allowed the appeal.

Slade J said the employment judge was right not to take into account the overheard pub conversation in interpreting the email. The conversation took place about three weeks after the email was written, the speaker was not identified and no contemporaneous note was made of what was said. It would therefore have been “unsafe” to rely on evidence of the conversation to interpret the email.

However, Slade J found that the employment judge erred in his interpretation of the email. In her judgment, the email went beyond pointing out the risk of claims if the claimant were selected for redundancy. It should 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 he alleged were related to his disability.

Based on that interpretation, Slade J held that there was a “strong prima facie case” that the advice fell within the iniquity principle, which she described (citing Norris J in BBGP Managing General Partner Ltd v Babcock & Brown Global Partners [2011] Ch 296) as requiring something “beyond conduct which merely amounts to a civil wrong”, but rather “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. …”.

Slade J set out various categories of conduct with her views on whether they would or would not fall within the principle, including the following:

  • Advising that a certain course of action runs a risk of being held unlawful would not fall within the principle, whether the relevant illegality was a breach of contract, discrimination or breach of fiduciary duty.
  • Advising that a certain course of action which may be unlawful could be taken “shades into iniquity”, in Slade J’s words.
  • Advising how to commit fraud or breach of fiduciary duty would “clearly” be an iniquity.
  • Advice to commit the tort of discrimination “may be different in degree” from advice on how to 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 the present case, Slade J said, there was a strong prima facie case that what was advised was “not only an attempted deception of the Claimant but also, if persisted in, deception of an Employment Tribunal in likely and anticipated legal proceedings”.