Schrödinger’s threats – or when ‘confidential’ letters are made public

Guest post by Richard Moorhead, professor of law and professional ethics at Exeter University

Moorhead: Silence is power

Dan Neidle, former Clifford Chance tax partner and now lead of Tax Policy Associates, has caused a stir by accusing the current Chancellor of the Exchequer, Nadim Zahawi, of “a series of unsatisfactory answers about his tax affairs. At least two are provably false (and one I [Neidle] characterised as a ‘lie’.”

Now he has published letters he says are “designed to intimidate” from Zahawi’s lawyers, Osborne Clarke (OC). OC has sought to assert these are without prejudice and/or confidential. Publication, it claims in one of those secret letters, “would be improper”.

The Times covered the story on Saturday, with Zahawi’s spokesman quoted as saying: “Nadhim sent a polite, confidential letter through his solicitors to Mr Neidle to correct a few inaccuracies and ask that he reconsider his allegation of dishonesty. The letter did not ask for a reply.”

I begin by asking, politely too, whether describing a letter which contained an allegation of impropriety as polite is misleading. This is a point to which I will return.

Neidle describes his reasons for publishing here and, in more detail, here. He also says he is going to write to the Solicitors Regulation Authority (SRA) to ask that it clarify its guidance on the misuse of without prejudice/confidentiality in relation to strategic lawsuits against public participation (SLAPPs).

I support that. The SRA is already looking at SLAPPs and one would hope that the matter is properly considered.

Neidle also says he is not complaining to the SRA about Zahawi’s firm. The SRA might nonetheless investigate and, whether it does or not, it will need to think about the professional ethical implications raised by the tactics he complains of.

As a result, it is worth considering how the practices Neidle describes might amount to a breach of the SRA code of conduct and so merit greater attention in guidance and perhaps investigation.

On investigation, I emphasise the word might here; in general terms we have only one side of the story. I pose here questions about Zahawi’s lawyers’ (OC’s) conduct, rather than assert wrongdoing has occurred; we would, as ever, be helped by more context.

Let’s start with OC’s first letter. Labelled ‘Confidential and Without Prejudice’, it raises “serious concerns about your latest direct allegation of dishonesty”. It discusses ways in which Neidle’s judgement of Zahawi may be flawed.

It then says this: “I have marked this email without prejudice because it is a confidential and genuine attempt to resolve a dispute with you before further damage is caused. Our client wants to give you the opportunity to retract your allegation of lies in relation to our client. That would not of course stop you from raising questions based on facts as you see them.

“You have said that you will ‘not accept’ without prejudice correspondence. It is up to you whether you respond to this email but you are not entitled to publish it or refer to it other than for the purposes of seeking legal advice. That would be a serious matter as you know. We recommend that you seek advice from libel lawyer if you have not done already.

“Should you not retract your allegation of lies today, we will write to you more fully on an open basis on Monday. In the meantime, our client reserves all of his rights, including to object to other false allegations that you have made.”

I note here there appear to be three implied strings to the bow here: they seem to be saying he risks libel for the dishonesty allegation; libel for the other allegations; and some kind of unspecified wrong for the “serious matter” of publishing the correspondence.

The letter does not identify how it is serious. OC asserts the email is confidential and without prejudice, although Neidle had already put it on notice that he would not accept without prejudice correspondence.

He is given that day to retract or face a further letter.

The bits of the second letter that I think are of particular interest to professional ethics questions are:

“1.3 You have said that you will not accept without prejudice correspondence and therefore we are writing to you on an open, but confidential basis. If your request for open correspondence is motivated by a desire to publish whatever you receive, then that would be improper. Please note that this letter is headed as both private and confidential and not for publication. We therefore request that you do not make the letter, the fact of the letter or its contents public.”

Like the allegation of “seriousness”, the nature of the impropriety is not further identified. OC also says: “1.4 Please also do not misrepresent the nature of this letter. It is not a threat to sue for libel. It is a request that you reconsider what you have published and adopt a fair and balanced approach to your investigations.”

However, the letter also says, at the end: “3.4 Our client reserves his rights in relation to what you have published to date.”

On its face, I think this is most reasonably interpreted as indicating the possibility of litigation for libel (and it should be read alongside the first letter, which advised him to seek libel advice).

If I can put it like this, and I am not trying to be facetious here, this is saying, ‘We are not threatening libel, we are just indicating it remains a possibility’.

Or, if I can put it, ahem, perhaps just a little facetiously: “Nice little dishonesty allegation there. Shame if anything were to happen to it.”

The letter goes on to indicate why OC says the allegation of dishonesty is “based on speculation” and why it should be said Zahawi had not lied. And that “[a]ny allegation that our client has evaded or avoided tax is strongly rejected”.

Also: “3.1 Our client is not asking for a response to this letter.” Although OC is asking for a response from Neidle, “our client does ask that you reconsider the false allegation of dishonesty that you have published and whether you have sufficient information to justify this.”

One interpretation (again the most reasonable one, I think) is that the “reservation of rights” in para 3.4 is intended, very subtly, to convey libel risk (and remember again the first letter, which underlines the point); a second interpretation is that OC is asking him to withdraw but no proceedings are contemplated (in which case, why state one’s rights are reserved?).

In essence, my interpretation is that libel is threatened, just not imminently or definitively. I encourage you to read the letters and make your own minds up on that. Tell me too, if you think I am wrong, I am genuinely interested.

So how might the solicitors’ rules have been breached? Let’s take the SRA guidance on Conduct in Disputes, which indicates the SRA is “aware of concerns surrounding [SLAPPs]… the misuse of the legal system, and the bringing or threatening of proceedings, in order to discourage public criticism or action.

“For example, cases in which the underlying intention is to stifle the reporting or the investigation of serious concerns of corruption or money laundering by using improper and abusive litigation tactics.”

I will assume, I hope not controversially, that the tactics we see above might have been deployed in part to stifle reporting of serious concerns and concentrate on the issue of abuse. We are told this abuse can include the making of “excessive or meritless claims, aggressive and intimidating threats”.

I am going to park the possibility that the threats of libel action and/or the idea that the letter is without prejudice are meritless claims.

I think the latter is certainly arguable: it can be argued that the letter is not seriously intended to be an attempt to settle (a litigation expert I have spoken to has indicated they think this is clearly not a without prejudice ,letter although I would expect OC to dispute that: the first letter could, if one was reading it kindly as implying that, if Neidle withdraws the allegation of dishonesty, he would not be pursued for the other allegations).

In any event, Neidle rejected without prejudice correspondence, which may be the end of it.

The guidance rehearses the principles that govern solicitors. I will not do the same but note the guidance emphasises that, “when the principles come into conflict, those which safeguard the wider public interest take precedence over an individual client’s interests. These include the rule of law and public confidence in a trustworthy solicitors’ profession”.

It also states that independence “clearly includes independence from the client…. [A solicitor] must and should on occasion be prepared to say to [their] client ‘What you seek to do may be legal but I am not prepared to help you to do it” (quoting an SDT case).

What I think is especially important is paragraph 1.4 of the code of conduct (and discussed in the guidance), which states: “You must not mislead, or attempt to mislead your clients, the court or others, either by your own acts or omissions or by allowing or being complicit in the acts or omissions of others (including your client).”

Again, claiming the correspondence is without prejudice, when it is not, or confidential when it is not, might amount to an attempt to mislead Neidle, although given Neidle’s background it is really more a (meritless?) claim being made than a serious attempt to mislead him, I think.

The most interesting argument is whether the lawyers may have been (knowingly or recklessly) complicit in attempts to mislead others.

I emphasise, we do not know. But it seems to me that this is the main mischief suggested, on the current rules (other mischiefs are perhaps missed by the rules), by the correspondence.

The letter contains a threat and its denial (and even more clearly if one reads them together). Like Schrödinger’s cat, they seek to treat the threat as alive and dead.

The approach may have been designed to enable Zahawi to say he is not threatening Neidle with libel whilst in fact doing that, however subtly. Or it may have been designed to let him say what he did say, which is that it’s just a polite letter asking for a few corrections (a misleading characterisation of the letter, I think, see above).

Either way, its design is to give some basis for deniability. And it is interesting to note that, if I am right that the letter does threaten libel, OC seeks to mischaracterise it itself: what it wants is to be able to issue a libel threat and deny Neidle the right to call it for what it is.

If this is a deliberate mischarcterisation, it must be there to mislead someone, no?

I think there is one other point which is deserving of mention. The guidance also addresses “making allegations without merit” – this could be because of insufficient investigation of their merits or of the underlying legal background.

It continues: “Solicitors bringing claims may be reckless as to the merits of the case – or actively uninterested in the merits – and aim to pressure on an opponent to settle the case outside of court.”

The guidance does not clarify that the threatening of meritless or inadequately investigated – or, I would say, inadequately specified – claims is something which falls within the guidance here. Perhaps it should.

Saying Neidle’s failure to accept the without prejudice/confidential nature of the correspondence is serious and that publishing the second letter would be improper is, I think, most reasonably seen as insinuating a professional breach by Neidle, which they do without, or certainly without specifiying, an apparent substantial basis.

There is potential here for the SRA to see this as a lack of integrity and independence. These allegation may be seen to “involve making allegations without merit where the sole purpose is to stifle valid public discourse”.

OC is trying to stop Neidle saying Zahawi has sought to threaten him. Saying Neidle risked doing something “serious” or “improper” is rather unsatisfyingly vague if it is serious about protecting its client’s purported confidentiality; this may suggest “there is no proper legal basis for a claim” or that it is exaggerating the nature of conduct it does not like in the hope it will cause delay, difficulty or a change of heart.

This might be seen mainly as intending to “cause distress and anxiety” or a failure to “interrogate and engage properly with the legal and evidential merits”.

There are other bases on which one could argue that secretly threatening litigation is often (perhaps not always) problematic and not in the public interest.

Threatening litigation where the party has no intention of pursuing that threat presents interesting issues too. There are a number of reasons why I think the SRA need to take a harder look at the area.

Silence is, as we have seen with non-disclosure agreements, power. Here the power is being deployed to protect a very senior politician in an area where the government has just expressed a measure of outrage at SLAPPs.

The SRA, in taking this on, will have to grapple with realpolitik and independence in Schrödinger’s box. For that, the regulator will be thankful that Neidle is saying he will not ask it to investigate OC.

This is an edited version of a blog that first appeared on Lawyer Watch 

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