UK: Internal grievance report could not retrospectively acquire legal privilege

Employers should bear in mind that internal grievance investigation reports will usually not be privileged and so will be disclosable at tribunal. A recent EAT ruling held that the original version of an internal report, which was not privileged at the time it was prepared, did not later acquire legal advice privilege simply because comparison to the final version disclosed in tribunal proceedings would reveal legal advice taken on the contents of the report.

In University of Dundee v Chakraborty, Mr Chakraborty raised a grievance in relation to harassment and race discrimination under the University of Dundee’s internal Dignity at Work Policy. The investigation was initially carried out by a member of academic staff and a report prepared. Following Mr Chakraborty’s submission of a tribunal claim and before disclosing the report, the University sought external legal advice on its contents. That legal advice suggested amendments, which were made along with some further changes by the author, and the amended version of the report was then disclosed with a note on it stating that it had been amended and reissued following independent legal advice. Mr Chakraborty’s application for disclosure of the first version of the report.was granted. The EAT ruled that the original version of the revised grievance report was not capable of retrospectively attracting legal advice privilege, notwithstanding the possibility that inferences could be drawn concerning the nature of legal advice given to the University by comparing the two versions.

Depending on the circumstances, it may be possible to claim privilege over early drafts of a report clearly prepared for the purpose of obtaining legal advice or in the context of pending litigation.  However, it will not be possible to retrospectively apply privilege to a report which was not protected at the time of its creation.  See our HSF Litigation Notes blog post for further details.

Anna Henderson
Anna Henderson
Professional Support Consultant, London

UK: tribunal considers limits of ‘without prejudice’ protection for settlement correspondence

Employers and their advisers seeking to settle claims on termination of employment may be tempted to flag the potential for serious consequences for the employee should they refuse, for example alleging that their misconduct could amount to criminal or regulatory offences. There is a risk that allegations are made without due care, on the assumption that the communication will be protected from disclosure in any future tribunal proceedings by without prejudice privilege.  However, this protection will be lost if comments amount to ‘unambiguous impropriety’.  A recent case has flagged the fine line between acceptable comments and improper pressure amounting to unambiguous impropriety, and emphasises the need for caution when making allegations in the context of settlement negotiations.

In Swiss Re Corporate Solutions Ltd v Sommer, an employee had copied her grievance emails, which included personal data and confidential client information, to her own personal email account and her husband’s account in order to retain a copy of the evidence for use in her grievance. At the time the employer had described this as a low level data breach and instructed the employee to delete the material, which she did.  However, in settlement correspondence the employer’s solicitors described her actions as serious misconduct which could lead to summary dismissal, criminal convictions, fines and/or findings of a breach of the FCA Conduct Rules which would make it difficult for her to work again in the regulated sector.  The employee was subsequently dismissed for redundancy.  She brought various discrimination and dismissal claims and sought to admit the settlement correspondence in evidence.

At first instance the tribunal found that the allegations made in the settlement correspondence grossly exaggerated the severity of what the employee had done in order to pressure her to accept the offer, and so amounted to unambiguous impropriety.  The Employment Appeal Tribunal disagreed.  It noted that there can be unambiguous impropriety if an employer makes allegations dishonestly or in an attempt to blackmail, and that baseless or exaggerated allegations could be evidence of dishonesty.  However in this case there was an arguable basis for the allegations, and no evidence of the guilty party’s state of mind was available.  The EAT could not find there to be ‘unambiguous impropriety’ except in a very clear case and with the benefit of evidence of the guilty party’s state of mind (and the EAT doubted this was possible at a preliminary hearing without oral evidence).  Exaggeration by itself is insufficient.

However, the EAT did note that the making of the allegations “sailed close to the wind”.  To avoid potentially losing without prejudice protection or at least having to defend the factual basis of allegations at a hearing, it is prudent to adopt a restrained approach in correspondence both from employers and their advisers, for whom professional conduct issues may also be relevant.

Anna Henderson
Anna Henderson
Professional Support Consultant, Employment, London

 

UK: Court of Appeal holds advice on dismissal for redundancy not a “cloak” for dismissal on basis of discrimination

The Court of Appeal has held that an email containing advice from an in-house lawyer on redundancy was not, as the EAT had found, a cloak for dismissal on the basis of discrimination (Curless v Shell International Limited [2019] EWCA Civ 1710).

The Court of Appeal agreed with the Employment Tribunal that the advice given “was the sort of advice which employment lawyers give ‘day in, day out’ in cases where an employer wishes to consider for redundancy an employee who (rightly or wrongly) is regarded by the employer as underperforming.” This was, therefore, not advice to act in an underhand or iniquitous way.

The decision leaves open the question whether the iniquity principle, which prevents privilege from applying in some circumstances, is confined to situations involving dishonesty, or extends more widely to other circumstances which are contrary to public policy, and whether that includes the tort of discrimination.

The differing interpretations of the key email in this case demonstrate the importance of employment law advice being drafted clearly, so that there is no doubt that the advice being given is as to the options available to an employer (along with the associated risks) and cannot be misinterpreted as advice on how to “cloak” a dismissal on a discriminatory basis as something else. This is particularly so given the current uncertainty over the scope of the iniquity principle.

The case is also of interest in the Court of Appeal refusing to grant an anonymity order, even though the hearing before the Employment Tribunal was a closed hearing and an anonymity order was made by the EAT. The Court of Appeal also quoted from the email in issue, rejecting suggestions that the judge hearing the substantive dispute might be tainted by knowledge of it, commenting that judges are well used to having to exclude from their minds evidence which is inadmissible. It is not clear, however, whether the court was aware that two lay members will also hear the case and they may be less experienced in doing so.

This is the latest in a number of recent decisions emphasising the importance of open justice and the limited scope for derogations from it, and suggests anonymity orders, at Court of Appeal stage at least, will be difficult to obtain in most cases.

Background

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

On or about 19 May 2016 C overheard a conversation in a pub in which, as the Employment Tribunal found, a woman mentioned that a lawyer at S 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 C 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 S to another. C 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 him.

The email said the sender had spoken to S’s General counsel. It then went on to say:

“It looks as though there are both opportunities for SVS conversations (as parts of the wider UK announcements and done consistently with others) and opportunities for potential compulsory redundancies. On a strictly confidential basis they are looking at reducing the overall number of senior C & P lawyer roles they have, both as part of the integration and generally.

I told him this is their best opportunity to consider carefully how such processes could be applies [sic] across the board to the UK legal population including [C]. If done with appropriate safeguards and in the right circumstances, while there is always the risk he would argue unfairness/discrimination, there is at least a wider reorganisation and process at play that we could put this into the context of. I felt in the circumstances this is definitely worth considering even if there is the inevitable degree of legal risk which we would try to mitigate. Otherwise we risk impasse and proceedings with ongoing employment with no obvious resolution. Happy to discuss next week.”

In November 2016 S terminated C’s employment by three months’ notice, allegedly by reason of redundancy. In March 2017, C brought a second claim in the employment tribunal alleging further disability discrimination, victimisation and unfair dismissal. In broad terms, C alleged that S relied on a planned re-organisation of its in-house legal department as a pretext by which to terminate his employment by way of redundancy. He sought to rely on both the email and the conversation on the basis that any privilege in the communications was displaced by the iniquity principle.

Decision of Employment Tribunal

The employment judge found that privilege in the April email had not been displaced by the iniquity principle. He rejected C’s argument that, on its proper interpretation, the email recorded advice about how to dismiss C dishonestly or because of discrimination / victimisation. In any event, in the judge’s view, advice on the commission of the tort of discrimination would be insufficient to engage the iniquity principle. The Judge also considered that the conversation in the pub was protected by privilege.

Decision of the EAT

Slade J (sitting alone) allowed the appeal, finding there was a ‘strong prima facie case’ that the advice fell within the iniquity principle. In her judgment, the April email went beyond pointing out the risk of claims if C 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 C to avoid his continuing complaints and difficulties with his employment which he alleged were related to his disability.

Slade J set out various categories of conduct with her views on whether they would or would not fall within the iniquity principle. She considered that 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”.

She also considered that no privilege could be claimed in respect of the overheard conversation in the pub.

For further consideration of the EAT decision see our post.

Decision of the Court of Appeal

At the heart of the appeal was the meaning of the April email. The Court of Appeal rejected the interpretation placed on it by the EAT, agreeing instead with the interpretation of the Employment Tribunal.

The advice given was, it considered “the sort of advice which employment lawyers give ‘day in, day out’ in cases where an employer wishes to consider for redundancy an employee who (rightly or wrongly) is regarded by the employer as underperforming”. This was not therefore advice to act in an underhand or iniquitous way.

The court observed that a significant reorganisation of S’s legal department was underway in 2016 involving the loss of some jobs. S was seeking legal advice on whether and if so how C might be either offered voluntary severance or dismissed on the grounds of redundancy in the course of that reorganisation, these being the two “processes” mentioned in the email.

Legal advice was being given on how such processes could be applied to C “with appropriate safeguards and in the right circumstances”. The email left open what such safeguards or circumstances might be but there was nothing in the email to suggest that if further elucidation was sought and given it would have consisted of anything other than entirely conventional advice. The writer was considering two alternative risks. If the processes led to C being selected for redundancy, there was a risk that he would argue that the dismissal was unfair and discriminatory. On the other hand, if C was not considered for redundancy and remained in employment the  tribunal claim made in 2015 would continue anyway and there was a risk of an impasse.

So far as the conversation in the pub was concerned, it could not be used, as C sought, as an aid to interpreting the email. It was some two weeks later and there was no evidence that the woman making the comments concerned had seen the email. As the court put it ‘”the advice in the email cannot be tainted by a conversation involving gossip from someone else after the event.”

Given the Court of Appeal’s view on the meaning of the April email, the scope of the iniquity principle did not arise for decision. The court stated that it was common ground between counsel that if the email had the meaning ascribed to it by the Employment Tribunal the iniquity exception had no application, whereas if it had the meaning ascribed to it by the EAT it was part of a dishonest plan. S had, however, sought to argue that the iniquity exception was confined to dishonesty and did not extend to other circumstances which are contrary to public policy, so the court set out the bare bones of the argument. S’s case was  that whether or not privilege attaches to a communication must be clear at the time it is made. It cannot depend on a retrospective evaluative judgment by the court on whether the purpose of seeking advice is sufficiently iniquitous to prevent privilege from attaching to the communication. The Court of Appeal decision in Barclays Bank v Eustice [1995] EWCA Civ 29, which decided the iniquity principle was not confined to cases of dishonesty, was not binding on the court as it was inconsistent with the later decision in the House of Lords in R v Derby Magistrates Court ex parte B [1996] 1 AC 487.

The court said this was an important argument which would no doubt have to be decided one day, but not in this case.

A final point of interest is that while the hearing before the Employment Tribunal was a closed hearing and the EAT made an anonymity order in respect of its proceedings (the case being referred to as X v Y)  the Court of Appeal refused to make an anonymity order in respect of the appeal. The court pointed out that the general rule is that a hearing is in public and it will usually only be in an exceptional case that derogation from the principle of open justice will be justified. There was no such justification here. S argued that if it won the appeal (which it did) and the email was excluded from evidence, the mind of the judge hearing the substantive dispute in the Employment Tribunal might be tainted by knowledge of the email through learning about the hearing and determination of this appeal. The Court of Appeal considered this a plainly inadequate ground for qualifying the operation of the principle of open justice. Judges were well used to having to exclude evidence which is inadmissible from their consideration of the merits and their reasoning. It is not clear whether the Court of Appeal were aware that two lay members of the tribunal will also hear the case and they may not be as experienced as a judge in excluding inadmissible evidence from their minds.

Peter Frost
Peter Frost
Consultant, Employment Group, London
+44 20 7466 2325
Anna Pertoldi
Anna Pertoldi
Partner, Disputes Group, London
+44 20 7466 2399

Hong Kong: Disciplinary Procedures & Privilege

Two recent English decisions highlight the particular challenges when managing legal professional privilege in the context of resolving employee issues. We consider these decisions and how the principles may apply in Hong Kong in relation to dominant purpose, waiver and iniquity and the lessons that they provide to employers in the context of employee investigations and disciplinary actions. Continue reading

UK: information gathering by in-house lawyer in order to obtain external advice may not be protected by legal advice privilege

The High Court has ruled in Glaxo Wellcome UK Ltd v Sandoz Ltd that an in-house lawyer’s communications with an employee of the business, who was accepted to be her in-house “client” for some purposes, were not protected by legal advice privilege where those communications were to seek and obtain information to provide to external solicitors in order to obtain their legal advice.  For further information see our litigation blog post here.

UK: Court of Appeal ruling on scope of protection for internal investigations

The Court of Appeal has handed down its eagerly awaited decision in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd. The High Court had found that notes of interviews with employees were not protected by litigation privilege, given that the employer’s purpose was to investigate allegations made by a whistleblower and, in its view, this failed the dominant purpose test. Employers will welcome the Court of Appeal ruling that the purpose of investigating allegations made by a whistleblower was part and parcel of preventing or defending litigation and therefore sufficient to meet the dominant purpose test. It also considered that documents prepared in order to avoid or settle contemplated litigation were covered by litigation privilege.

In relation to legal advice privilege, the Court of Appeal considered itself bound by Three Rivers No 5 to find that the privilege is limited to communications between a lawyer and those tasked with seeking and receiving advice on behalf of the client company. However, the court said that, if it had been open to it to depart from Three Rivers No 5, it would have been in favour of doing so – but this is a matter for the Supreme Court.

The decision is considered further in our litigation blog post.  The SFO has since decided not to appeal the case further.

UK: No privilege for advice on how to “cloak” dismissal on basis of discrimination as dismissal for redundancy

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. Continue reading

UK: Employee documents created using employer’s IT systems may not be privileged against the employer

Simpkin v The Berkeley Group Holdings plc highlights the potential benefits for employers of a clear and comprehensive IT policy, referred to in the employment contract and signed by an employee, which provides that emails and documents sent using the employer’s IT system are the employer’s property and will be subject to monitoring. The employer had such a policy in Simpkin and the High Court ruled that an employee who created and stored documents on the employer’s IT system had no reasonable expectation of privacy. As a result, documents and emails he sent from the employer’s system to his home email were not confidential or privileged as against the employer.

Continue reading

UK: Privilege – High Court confirms legal advice privilege can include lawyer’s summary of facts

A High Court decision has confirmed that the protection of legal advice privilege is not restricted to actual legal advice. The privilege will protect other information communicated from the lawyer to the client (or vice versa) to enable the lawyer to advise and the client to make informed decisions in a relevant legal context. This may include references to matters in the public domain or to meetings and correspondence that would not, in themselves, be privileged.  See the HSF Litigation blog post here for further details. (Property Alliance Group Limited v The Royal Bank of Scotland Plc)