Daniel Tatton-Brown QC discusses the recent decision of the EAT (Slade J presiding) in X v Y  UKEAT/0261/17, which has attracted much interest among employment lawyers, raising the spectre of legal advice given to employer clients being subject to disclosure orders.
Facts and procedural history
X brought a complaint of discrimination and victimisation following his dismissal, which was ostensibly for redundancy. He had previously complained of disability discrimination, and alleged that that fact, and/or his disability were reasons for his dismissal. In his pleaded case he referred to and relied on extracts from a document that had been sent to him anonymously, and which set out legal advice provided to the employer, Y, regarding X and the redundancy exercise.
Y successfully secured from the ET an order striking out those paragraphs on the grounds that the document was subject to legal advice privilege and thus inadmissible. X succeeded on his appeal to the EAT in reversing that decision, contending that the email provided advice as to how to cloak what would otherwise be a disability discrimination dismissal as a dismissal for redundancy, and that that fell within the principle that no privilege attaches to advice given for the purpose of facilitating an iniquity.
Relevant legal principles
Legal advice sought or given for the purpose of effecting “iniquity” is not privileged. The principle is founded on public policy. The rationale for the exception has been described in these terms:
An important issue is this: what constitutes “iniquity” for the purposes of the rule? There are a number of cases that discuss this. In one (cited by the EAT) it was said:
“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  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  PNLR 52, 72); or making a disposition with the intention of defeating a spouse’s claim for financial relief (C v C (Privilege)  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  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  2 Ch 751.)”
Analysis of the appeal
Part of the appeal concerned the true meaning of the relevant email. The EAT held that the ET was wrong to conclude that it simply disclosed advice on how to handle a possible redundancy: according to the EAT it set out legal advice that the genuine redundancy exercise could be used as a cloak to dismiss the Claimant to avoid his continuing complaints and his difficulties with his employment which (he claimed) related to his disability.
The interesting part of the decision concerns the second issue: whether, on that interpretation of the email, privilege was lost. The ET had held that the statutory tort of discrimination, serious though it was, did not amount to “iniquity” of the sort that might justify removing the privilege that ordinarily attaches to legal advice.
The EAT disagreed. Slade J held:
An important part of the EAT’s conclusion that the ”iniquity” threshold had been crossed was based on the fact that had the solicitors’ advice been acted upon there would have been a deception on the employee and on an Employment Tribunal in anticipated future proceedings. That suggests that the fact that the case concerned discrimination (as opposed to unfair dismissal, for instance) was not a decisive part of the judge’s conclusion. This potentially widens the scope of the iniquity exception to a worrying degree.
Suppose a client who needs to carry out a genuine redundancy exercise seeks advice. They indicate that they would like to get rid of X, the employee who is considered (for non-discriminatory reasons) to be most expendable. The solicitors, engaging in an exercise of a sort of reverse-engineering, advise the client to adopt objective criteria which will result in the “selection” of that employee. What might be construed as legitimate advice aimed at avoiding an adverse legal consequence (a successful claim for unfair dismissal) is, from another perspective, advice designed to mislead a tribunal into believing that the selection of the employee was a consequence of the chosen criterion, rather than vice-versa.
On the other hand, an unusual feature of the case ought not be overlooked. Normally, the employee will not have seen the relevant legal advice: he or she would have to seek to establish the strong prima facie case of iniquity without it. This is likely to be hard: notoriously, direct evidence of discrimination is rare. Unusually, in X v Y, the prima facie case of iniquity was derived from the advice itself. Without that sort of smoking gun the hurdle of establishing iniquity in employment claims, even if it has been lowered as a result of this decision, is unlikely often to be cleared.
 Per Parker LJ in Banque Kayser v Skandia  1 Ll. Rep 336 at 338