The Employment Appeal Tribunal in X v Y Ltd has ruled 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.  Relevant passages in the claimant’s claim should therefore not have been struck out.

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. 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.

In the present case, an employee who had raised allegations of disability discrimination was made redundant as part of a wider redundancy exercise amongst the legal department.  The EAT found on the facts that the advice in question went beyond pointing out the risk of claims if the claimant were selected for redundancy, and (on a strong prima facie case) was to be interpreted as advising 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.  As such, the advice was an attempt to deceive both the claimant and, ultimately, an employment tribunal.

The judgment does not set out the full text of the email in question, but does highlight a number of factors which influenced the EAT’s view on how the email should be construed:

  • the references to this being the ‘best opportunity’ to apply processes to the legal population ‘including the individual’, that there was ‘at least a wider reorganisation and process at play that [the employer] could put this into the context of’, and that otherwise the employer risked ‘impasse and proceedings with ongoing employment with no obvious resolution’
  • the letter did not contain any advice on using neutral selection criteria for redundancy, which might have been expected had this simply been advice on carrying out a redundancy process.

The EAT gave the following guidance on when advice might fall foul of the iniquity rule:

  • Advising that a certain course of action runs a risk of being held unlawful would not be iniquitous, 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”.
  • Advising how to commit fraud or breach of fiduciary duty would “clearly” be an iniquity.
  • Advising termination which would be a breach of a notice provision in an employee’s contract “may well not be” iniquitous.
  • 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-house and external legal advice should be framed carefully in light of this ruling, particularly where written advice is given on the potential to dismiss for a fair reason where there are allegations of discrimination in the background.  The case is discussed further in our Litigation Blog here.  It is not yet known whether the ruling will be appealed.