Emails exchanged between corporate board members discussing commercial settlement terms will not always benefit from the protection of privilege from disclosure.
The precise scope of litigation privilege has often presented interpretation issues. Throughout the life of a case litigants must categorise documents as either of a type falling to be disclosed or as documents which may be withheld or protected from disclosure. The recent Court of Appeal decision in the case of WH Holding Ltd and another v E20 Stadium LLP  EWCA Civ 2652 sought to clarify the matter in relation to the scope of litigation privilege when it handed down its significant judgment at the end of 2018.
Summary of privilege
Privilege protects and ensures the confidentiality of correspondence and communications in a number of different scenarios. The two most common forms of legal professional privilege are (1) legal advice privilege and (2) litigation privilege. Legal advice privilege shields a party from having to produce communications between the party and its solicitor. Litigation privilege applies only when litigation is contemplated or pending and can go further in scope and applicability than legal advice privilege. For example, protecting communications between a party and a third party to obtain information, evidence or advice in the litigation or contemplated litigation.
In order to benefit from litigation privilege communications must satisfy a three-limbed test prescribed by Lord Carswell in the case of Three Rivers District Council v Bank of England (No. 6)  UKHL 48. Lord Carswell held that communications between parties or their solicitors and third parties for the purposes of obtaining information or advice in connection with existing or contemplated litigation are privileged, but only when the following conditions are satisfied:
- Litigation must be in progress or in contemplation;
- The communications must have been made for the sole or dominant purpose of conducting that litigation; and
- The litigation must be adversarial, not investigative or inquisitorial.
West Ham United Football Club (WHFC) have the benefit of a lease from E20, the owner of the Olympic Stadium. The lease allows WHFC to use the Olympic Stadium for home matches. A dispute arose between the parties concerning the number of seats WHFC could use at the stadium. During the course of the dispute, E20’s board members and stakeholders exchanged six emails in January 2017 in which they discussed commercial terms to settle the matter. E20 asserted that the emails were protected from disclosure by litigation privilege on the basis that they were prepared “for the dominant purpose of discussing a commercial proposal for the settlement of the dispute … at a time when litigation was in reasonable contemplation”. E20 claimed litigation privilege protection because, on its view, the subject of the emails concerned emails passing between E20’s board and stakeholders discussing a commercial proposal to settle the dispute between the parties and it argued that the emails were created with the dominant purpose of discussing the commercial settlement. E20 argued that the “conducting litigation” criteria within limb 2 of the conditions set out by Lord Carswell in Three Rivers was engaged and encompassed documents concerned with avoiding or settling litigation.
WHFC challenged E20 on their interpretation of privilege on the basis that, whilst acknowledging that the internal emails discussed commercial considerations and proposals for the possible settlement of probable litigation with WHFC, the documents were not concerned with obtaining information or advice for use in the litigation. Therefore, WHFC applied to the court for an order to inspect the emails on the basis that they were not covered by litigation privilege.
The first instance judge refused WHFC’s application and held that the emails were protected by litigation privilege, citing the case of SFO v Eurasian Natural Resources Corporate Ltd  EWCA Civ 2006 (ENRC) as authority. The court in the SFO case confirmed that the document or communication did not have to be concerned with obtaining advice or evidence for use in litigation in order to be protected by litigation privilege. Accordingly, the judge felt that he could not and should not order inspection of the emails.
WHFC appealed against the dismissal of their application to inspect the six emails to the Court of Appeal. The appeal was allowed. The Court of Appeal considered that the SFO case did not serve to expand the scope of litigation privilege to include documents which neither seek advice nor information for the purpose of conducting litigation. The court rejected E20’s argument that the “conducting litigation” limb of the Three Rivers test encompassed documents which merely included discussions concerning a commercial settlement of that litigation. Instead, it summarised the application of litigation privilege as follows:
- It will be engaged when litigation is in reasonable contemplation.
- Once engaged it covers communications between parties or their solicitors and third parties made for the purpose of obtaining information or advice in connection with the conduct of the litigation, provided it is for the sole or dominant purpose of conducting the litigation.
- Conducting the litigation includes deciding whether to litigate and whether to settle.
- Documents in which this information or advice cannot be disentangled or which would reveal that information or advice will be covered by privilege.
- There is no separate head of privilege which covers internal communications falling outside the scope of litigation privilege.
In this case the court considered that the email documents related purely to strategy or potential settlement offers and would not have been produced for the dominant purpose of the litigation. For example it supposed that if you asked the question as to why the document was created, the answer could easily be that the documents were to deal with other commercial matters such as the “general management of the business” or to ease cash flow concerns
The main issue in this case was to determine whether litigation privilege extends to documents concerned with the settlement or avoidance of litigation which do not seek advice or information for the purpose of conducting the litigation nor do they reveal the nature of such advice or information.
Prior to this case, the court made the point that there was no prior authority confirming whether the scope of litigation privilege extended to purely commercial discussions concerning settlement. The SFO case confirmed that “conducting litigation” could extend in some manner to documents relating to decisions as to whether to settle a case. However, the first instance judge went too far in the eyes of the Court of Appeal in considering that litigation privilege extended to documents created with the dominant purpose of merely discussing a commercial settlement. It also saw no basis to provide corporates with greater protection in confirming that there is no separate head of privilege covering internal communications within a corporate body.
This case is a warning for management in handling documents when a case may be on the horizon. The case reinforces the importance of exercising caution when creating new documents once a dispute is contemplated. Commercial parties need to be aware that their communications may eventually come before the court and should take appropriate precautions in terms of their conduct. It may be preferable to hold commercial discussions relating to settlement orally, as such communications if made in writing could fall to be disclosed applying this latest decision. If in doubt, seek legal advice.
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By Daniel Baker