Court of Appeal finds no litigation privilege in internal emails discussing commercial settlement of dispute

Background

This case, WH Holding & Anor v E20 Stadium LLP, involving a dispute between the football club West Ham and their stadium landlords, shone a spotlight on the extent of litigation privilege.

The meaning of “litigation privilege” and when it will apply are explained in detail in our guide to legal professional privilege here. Litigation privilege applies to confidential communications between parties, their lawyers and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation when, at the time of the communication in question, the following conditions are satisfied

• Litigation is in progress or reasonably in contemplation;
• The communications are made with the sole or dominant purpose of conducting that anticipated litigation; and
• The litigation must be adversarial, not investigative or inquisitorial.

The appellants (together, “West Ham”) had applied under CPR 31.19(6)(a) for the court to inspect six emails, in which privilege had been asserted by the respondent, E20. E20 argued the emails were protected by litigation privilege because they were created with the dominant purpose of discussing a commercial settlement of the dispute when litigation with West Ham was in contemplation. At first instance, Norris J dismissed the application, and held that the emails were protected by litigation privilege.

Appeal decision on scope of litigation privilege

The Court of Appeal disagreed, and ordered disclosure of the emails. The Court acknowledged that the recent ENRC case made it clear that the “conducting litigation” element of litigation privilege encompasses avoiding or settling litigation. However, the Court of Appeal held that documents prepared with the dominant purpose of discussing a commercial settlement are not covered by litigation privilege. Not all documents created for the purposes of litigation will be covered by privilege – the communication must be for the purpose of obtaining advice or information about the litigation.

Notwithstanding its decision in relation to the particular emails in question, the Court of Appeal commented that litigation privilege will cover a document in which advice or information obtained for the sole or dominant purpose of litigation cannot be disentangled, or if the document would otherwise reveal the nature of such advice or information. It may therefore be prudent for businesses to involve their lawyers in internal communications about possible settlement to help ensure that those communications form part of the continuum of advice between lawyer and client and are protected by legal advice privilege (if the legal tests are met).

Obiter comments on other issues

In light of its decision on the scope of litigation privilege, it was not strictly necessary for the Court of Appeal to consider the other issues raised on appeal, being:

• The grounds upon which the court will be prepared to inspect documents where there is a challenge to the assertion of privilege; and
• The application of the “dominant purpose” test in relation to documents produced for more than one reason.

However, the Court did make a number of interesting, non-binding comments in relation to each of these issues.

Court inspection

West Ham argued that the court has a broad and flexible discretion to inspect documents which are the subject of a challenged claim to privilege, and that the discretion will be exercised on the facts of each case on a common sense basis and affected by the overriding objective. E20, on the other hand, argued for the narrower interpretation applied by the judge at first instance i.e. that the threshold for inspection is whether it is reasonably certain that the person claiming privilege has mistakenly represented or misconceived he character of the documents, or it is apparent from other material that the evidence supporting the claim to privilege is incorrect on material points. Ultimately, the Court of Appeal agreed with West Ham that the court’s discretion is a general one.

Applying the “dominant purpose” test

The Court also considered the lengths to which a judge needs to go to satisfy him or herself that conducting litigation is the dominant purpose of a document created for multiple purposes. In this case, the judge at first instance did not analyse the purpose of each document in which E20 claimed litigation privilege, instead he simply asked himself why else would the documents have been created other than to dispose of the litigation being threatened? The Court of Appeal considered it was legitimate for the judge to have taken this summary approach.

Comment

The Court of Appeal said that it “cannot see any justification for covering all internal corporate communications with a blanket of litigation privilege”. It is therefore crucial for organisations to be cautious about the creation of documents relating to internal settlement discussions and not to assume that any document relating to litigation will be privileged.

Should a document not be covered by litigation privilege, it is worth considering whether it may be covered by legal advice privilege. Settlement communications between an external or in-house lawyer and the Board (i.e. the “client”) can be withheld from disclosure in subsequent proceedings provided the tests for litigation or legal advice privilege are met. The key practical points in this context are:

• A board minute which records or evidences legal advice provided to the board will be privileged.
• Any part of the minute which records board members discussing the advice between themselves, records business decisions resulting from the advice or otherwise goes beyond simply stating the advice that has been received will not benefit from legal advice privilege.
• Legal advice contained in board minutes should not be disseminated widely or else there is a risk that confidentiality (and therefore privilege) will be lost.