Court of Appeal: redundancy advice was protected by privilege

The Court of Appeal, in its unanimous judgment, overturned a ruling by the employment appeal tribunal (EAT), which had ruled that the advice could not be privileged as the 'iniquity' exception applied. Under this principle, no privilege attaches to documents or communications between client and lawyer where the purpose of the client was the furtherance of crime, fraud or other "iniquity".

The Court of Appeal ruled that the iniquity principle did not apply to the advice in this case, which was set out in an email obtained by the former employee.

"We agree with the [original employment tribunal] that this 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," it said in its judgment. "We do not agree that this was advice to act in an underhand or iniquitous way."

Employment law expert James Cran of Pinsent Masons, the law firm behind Out-Law, said that while the decision "does not really shift the goal posts on the issue of when advice loses legal professional privilege", the judgment served as a reminder of some "practical lessons" for those involved in either the giving or the receiving of legal advice.

"Think about privilege at the outset of tricky issues: who are you sending emails, instant messages or other communications to, about what, and why; don't overdo the 'cc'-ing; and always mark advice communications appropriately, for example with 'Confidential and subject to legal advice privilege'," he said.

"In addition, for any written advice, apply the age-old test: how would it look in court, or on the front page of the paper? Bear in mind that different courts can have starkly different views of the same thing: in this case, the Court of Appeal ultimately found the email was 'innocuous', but the EAT had reached a different view. So, think about how your communications might look to the EAT, or indeed any court, in a very unforgiving mood," he said.

The employee in question was employed as a senior in-house legal counsel from January 1990 until his dismissal, allegedly for redundancy, in January 2017. From 2011, his employer, Shell, became concerned about his work performance, particularly his ability to meet deadlines and general standard of work. He was given low 'individual performance ratings' and his internal applications for other roles were rejected. The employee, who suffers from type 2 diabetes and obstructive sleep apnoea, claimed that these matters gave rise to unlawful disability discrimination and/or failure to make reasonable adjustments. He submitted an employment tribunal claim to this effect in August 2015.

In February 2016, the employer business began a group-wide redundancy programme. The employee was placed in a redundancy consultation process and his employment terminated, with three months' notice, on 1 November 2016. He issued a second employment tribunal claim in March 2017 in which he claimed for disability discrimination, victimisation and unfair dismissal, and claimed that the redundancy was a sham.

Before the tribunal, the employee relied on an email he was forwarded by an anonymous sender, which was headed 'legally privileged and confidential' and shared between other lawyers at the business. The email said that, given the ongoing redundancy exercise, there was "at least a wider reorganisation and process at play that we could put this into the context of" provided that it was "done with appropriate safeguards and in the right circumstances".

In the EAT's view, this email contained "advice that the redundancy situation can be used as a cloak for dismissing the claimant for other reasons", i.e. disability discrimination. The judge said that "a strong prima 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 Court of Appeal disagreed, finding that what was contained in the email amounted to day to day legal advice. It decided against further discussion of the scope of the iniquity exception, despite hearing submissions on the point.

Litigation expert Emilie Jones of Pinsent Masons said: "It is a pity that the Court of Appeal has not had the opportunity to provide further clarity as to the scope of the iniquity exception".

"It is well established that the exception applies where a crime or fraud is involved, but less clear in what circumstances conduct falling short of a crime or fraud is caught. In particular, there is a question as to whether dishonesty is required, or whether other conduct which the court considers contrary to public policy may be enough to make otherwise privileged documents disclosable," she said.

"This is problematic because businesses need to be able to identify with confidence when consulting with their lawyers whether or not the communications between them will or will not be privileged from disclosure to third parties. Likewise lawyers, whether in-house or external, need to be able to give appropriate warnings if the nature of what they are being asked is such that the resulting exchanges might be disclosable. More judicial guidance in this area would therefore be beneficial," she said.

The employee, in his evidence, had referred to a conversation he had overheard in a pub between two people he believed to have been lawyers from an external law firm instructed by the employer, who had referred to an employee whose "days are numbered" because they planned to deal firmly with his employment tribunal claim and there was an opportunity to manage him out as part of a reorganisation taking place. The employee had sought to use this conversation as an aid to interpreting the disputed email. However, the Court of Appeal did not accept that the conversation could be used in this way, as it took place two weeks after the email was sent and was mere "gossip" from people who were not involved in the correspondence.

Emilie Jones said: "The case is also a salutary warning about the dangers of discussing privileged matters in public places. Although it was not found in this case that confidentiality had been lost as a result of the conversation in the pub, it is important not to be complacent. Such discussions, and careless dissemination of privileged material generally, run the risk of a finding that the material is no longer confidential and therefore also no longer privileged".