In the public interest? NDAs after ABC

The Court of Appeal’s decision in ABC & others v. Telegraph Media Group Limited [2018] EWCA Civ 2329 prompts me to write about a topic I have avoided writing about so far: whether NDA’s should, in principle, be available for sexual harassment cases. I have not made up my mind, but the court’s reasoning and some reading in moral philosophy prompts a few questions.

First, the case. Five employees of a group of companies, apparently employing a well-known businessman, had made complaints, including (the Telegraph reports) about sexual harassment and racial abuse. Their claims were settled and made subject to non-disclosure agreements. They were independently represented and the agreements permitted certain legitimate disclosures (notably to the police). The newspaper has become aware of these allegations and wants to publish them. The businessman and his employer sought an interim injunction. They thought, and the Court of Appeal agreed, but the judge at first instance did not, that the nondisclosure agreements must have been breached. It is worth noting too that the subjects of the NDA’s were divided on publication: two supported the application for an injunction, one did not, and one said they were happy for the story to be published if they were not named. One we do not know about.

Part of the court’s reasoning turns on the rule that there is no confidence in an iniquity: the simple principle that confidentiality cannot be relied upon to conceal wrongdoing. Confidentiality can also be breached where the disclosure is of (not necessarily iniquitous) information might be “vital in the public interest”. In relation to this latter exception, courts customarily weigh, “the public interest in maintaining confidence against a countervailing public interest favouring disclosure.” Part of the public interest is “the observance of duties of confidence.” I thought, but I may be wrong, that a confidence that seeks to protect an iniquity is simply not a confidence and so there is no need to apply a public interest test there. Yet in this case, the court plainly did apply a public interest test to information which plainly alleged iniquity.

The way in which the court goes about weighing the public interest is curious. They are concerned to demonstrate, as a starting point, that a duty of confidentiality created under contract often carries more weight than some other duty of confidentiality. And that this is especially so where the obligation is contained in an agreement compromising or avoiding litigation. They tell us that, provided that the agreement is freely entered into, without improper pressure or any other vitiating factor, and with the benefit (where appropriate) of independent legal advice, and (again, where appropriate) with due allowance for disclosure of any wrongdoing to the police or appropriate regulatory or statutory body [note to the Court of Appeal, this is always appropriate], the public policy reasons in favour of upholding the obligation are likely to tell with particular force, and may well outweigh the article 10 rights of the party who wishes to publish the confidential information. They emphasise that part of the public interest is in, “the obvious advantages to both sides to the litigation in reaching a settlement (which not only serves the private interests of the litigants, but also the administration of justice and the public interest more generally, by freeing court resources for other cases)”. And also that, “other things being equal, the contract will be enforced (pacta sunt servanda),” especially where such contracts are compromising litigation.

The irony of this point being made with a Latin flourish should not be lost because they do not pause not ask themselves whether other things really are equal. Res ipsa flippin loquitur.

And whilst it is tempting also to say we have come to a pretty pass if freedom of expression is trumped by the need to enforce contract, I want to make a more measured point; it is not that enforcement of contracts is irrelevant to a consideration of public interest but that what is curiously missing from their analysis is the absolutely central problem: what is the public interest in having freedom of contract in allegations of iniquity? This is doubly curious in what purports to be an analysis designed to show a balancing of the public interest. It may be that the closed judgment reveals this balancing but the point of the open judgment is to convince us that the Court of Appeal has good reasons for what it did, and I find it difficult to see how those good reasons could not be better aired without breaching the confidentiality that the Court seeks to protect if they in fact existed.

What we have instead is a rather simple reliance on the public interest being swung by the importance of settlement agreements generally, and NDAs specifically, to the compromising of litigation. Let me mention, but put to one side, the belief that NDAs are necessary to compromise sexual harassment cases. That belief is, I think overstated. Sexual harassment claims would settle more often than not without the need to gag the parties, I think. But let me get to the more interesting point. It takes us back to the basic idea that there can be no confidence in an iniquity. I would argue that, even if the court is not wrong to say that disclosing confidential information about an iniquity is also subject to a public interest test, they should take a much more balanced look at the public interest around NDAs and in particular the idea there are some things that money should not be able to buy and the law should not support.

That last sentence is a reference to Michael Sandel’s book, and Chapter 3 in particular, How Markets Crowd Out Morals? There he suggests there are things that money cannot buy without dissolving the value to be ascertained. If I buy your friendship you ain’t my friend. But there are things which can be bought, where the value in the product is not degraded to those who make the purchase, but the broader system and those who use it is degraded or corrupted. A society that permits organ selling or the purchasing of babies for adoption are two of his examples. This prompts the obvious question: Is a legal system that supports the buying and selling of silence over allegations of iniquity a system that degrades itself or those who use it?

There can be no doubt that employers who use NDAs to silence victims and protect harassers degrade the systems of law and employment. And there can be no doubt too that the system creates value in allegations that are false or doubtful. Furthermore, the selling of silence inflates awards and creates mistrust in the system independently of whether the allegations made in such cases are true or false. Silence has an extra value because of the existence of NDAs and that extra value may encourage untrue allegations. It also probably makes the making of untrue allegations safer. But those making the allegations have to be able to stomach the normal consequence of making an allegation, true or false, which appears to include losing your job.

It’s true too that without NDAs an accuser has the power to damage the accused’s reputation, but they have that power anyway before they sign an NDA (subject to the possibility of various forms of retribution legal and otherwise). It is true also that NDAs create value in situations where both parties want guarantees of silence, the point which the Court of Appeal hangs its interim hat on. But that silence has an impact on others, most notably other employees who may fall victim to the same behaviours and who might benefit from knowing about the conduct of the miscreant. And any such employee making a claim would not have the benefit practically, and perhaps legally, of getting evidence from their fellow victims where they were subject to an NDA. Even if NDAs don’t chill reporting to the police (a debatable claim even with NDAs that technically permit such reporting); they do chill the collation of evidence in civil claims or other action short of litigation (something that the courts are normally fond of discouraging, quite rightly).

In sum, the public interest risks and harms must be weighed against the benefits to one group of cases: those where both sides genuinely want an NDA. I am going to wager that the size of this group is much smaller than the routine agreement of NDAs in sex harassment suggests. A court hearing the full case would need to think about whether a system that routinely silences the victims of a crime that was in the public interest as well. Nor is it much of a retort to say we don’t know if they are victims. There may be good reasons for silencing the mistaken (I’m not convinced, but let’s leave that door open); but we would also need to factor in routinely silencing and rewarding the malevolent too into this particular uncertainty.

Another part of the same chapter talks about the expressive effects of allowing markets to govern resources. The question then is what do we say about justice when we organise it this way? We can think of NDAs as a pragmatic response to the perils and failures of the civil justice system, which is effectively the court’s position, or we can see it as creating a market in silence and lies, or even as a licensing of licentiousness. But other values are, in Sandel’s words, being ‘smuggled in’. In seeing these cases as being about contracts, freely negotiated, with independent advice, the value of power is being smuggled in. Independent lawyers are not free of the systems they operate within and a system which routinizes silence in this way makes a hefty tilt in favour of businesses and men when talking in these terms. It may be true that employment disputes would sometimes be harder to settle without NDAs; but it may also well be the case that more organisations would have to face up to those allegations; properly determine what has happened; and properly resolve the cases themselves and their causes. Having resisted the idea that NDAs should be banned in sexual harassment cases, I am starting to come round to the idea. But more importantly, any court taking the view that there can be confidentiality in an iniquity after all just because there’s a contract saying so has to take a harder look at what the public interest is. To be fair to the Court of Appeal here, this case was only an interim one, and their reasons are truncated because of confidentiality concerns. The next time they should do better.

8 thoughts on “In the public interest? NDAs after ABC

  1. You acknowledge this was an interim application yet you have judged it as if it were a final decision. The considerations for the two are materially different.

    I also do not follow the basis upon which you grant sexual (not sex) harassment an elevated status over harassment related to a protected characteristics.

    I’d be interested to hear whether you agree with the antics of Mr Hain.

  2. I see this as an issue related to power, I keep hearing barristers online say that the case left alone without the intervention of the Telegraph and the use/misuse of parliamentary privileges may well have created law that would protect the powerless in future. But by this measure given the number of cases like this going back decades now surely we should have seen the end of the need for NDAs and super injunctions as the case law should have by now been protecting employees from behaviour like this?

    Or is a form of Darwinian entropy at play here – survival of the most litigious

    From my admittedly ignorant stand point the law and its practitioners seem more concerned with the process than the result and that has more of the hint of an industry rather than a profession and NDAs affect more than just these types of cases we have in a village near me a fraud investigation ongoing were the alleged perpretrators have issued threats and self written NDAs to intimidate employees from speaking out employees who do not have the financial wherewithal to hire council and have been silenced as a result allowing the fraud to proceed much further along than should have happened.

    So I find it quite difficult to understand why we find in a supposedly modern country in this permanent loop of power I dont think I’m alone in this confusion

  3. Richard,

    Some brief points (I hope).

    First, is this an iniquity issue? You proceed on the basis that the accusations are true. We don’t know. The point about compromise (not contract simpliciter) is that the accuser is paid for not proving their case. They put a price on their silence. Green pays it. His gain is that the accusation is not repeated. Their gain is that they don’t have to prove their case. So there is no iniquity. There’s an accusation which is not pursued. If there were a crime, that would not happen, and the agreement expressly says so.

    So, secondly, the protection of others doesn’t arise. No one is protected by unproven allegations which are then not persued in exchange for a mutually agreed price.

    Therefore, thirdly, we have not commoditised any value. The accusers could pursue their accusations. I agree that they would find it difficult but that is not because we sell rights. It is because we refuse to fund access to justice. That is something that shames us as a society but it’s a different debate entirely. If we refuse to allow people access to lawyers via public funds then they are subject to pressures about funding that may well impact their decisions. But that’s a wholly political decision- not a legal one at all.

    Finally, process. It’s wrong to conceive of process as a distraction. In truth we do not know what happened here. We will never know in terms of a certain narrative unless everyone involved agrees, which is vanishingly unlikely. So all we can do is try and fix rules that help us judge what happened in the balance of probabilities, which is the standard we’ve agreed to adopt. It’s the best we can do. We try to be fair by applying those rules to everyone, regardless of rank, wealth, or importance. Of course, Hain has undermined that. He has applied his own private law (privilege = privi lex) because he’s one of the 1,200 out of 65m of us who can. He’s done it so an already wealthy corporation can make money. And he’s undermined fairness to do so.

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