Another Case on Litigation Privilege
The court of appeal has handed down an important judgement confirming that litigation privilege does not extend to internal commercial settlement discussions.
The case involved a contract between West Ham Football Club (“West Ham”) and E20, the landlords of the London Stadium (the former Olympics venue), over the number of seats West Ham are entitled to use at the Stadium.
Before the trial, West Ham made an application to the court under CPR 31.19(6) (a) for the inspection of six emails sent between the board members and stakeholders of E20 containing internal discussions regarding potential commercial settlement of the dispute. E20 asserted litigation privilege over the emails on the basis that the dominant purpose of their creation was discussing a commercial proposal for settling the litigation.
The three issues on appeal were:
- Whether the scope of litigation privilege extended to documents prepared for internal commercial settlement discussions;
- What was the “purpose” for the creation of the documents: and
- Whether it was right for a court to inspect the documents.
Scope of Litigation privilege
To benefit from litigation privilege, a document must have been created for the sole or dominant purpose of conducting existing litigation or litigation which is in the reasonable contemplation of the parties.
Much of the judgement debated on the meaning of “conducting litigation”. E20 asserted that “conducting litigation” included discussions to settle the litigation in question. The Judge considered an earlier case of SFO v Eurasian Natural Resources Corporation (“ENRC”) Ltd  EWCA Civ 2006 (“ENRC”) but held that it did not extend the meaning of “conducting litigation” to include internal discussions to settle litigation.
The purpose test
The court held that the case of Three Rivers (No6)  UKHL 48 did not provide authority to extend litigation privilege to protect commercial settlement discussions. The disputed documents were only created to record internal commercial settlement discussions and not for the sole or dominant purpose of obtaining information or advice.
Inspection of documents by the Court
In its judgement the court discussed the circumstances in which a court will be prepared to inspect controversial documents over which privilege is asserted. The judgement confirms that courts have a general discretion to inspect documents under the CPR but warns that this discretion must be applied with caution in the view of the dangers of looking at documents out of context.
The judgement further confirms that this discretion must be exercised in accordance with the overriding objective, balancing the competing priorities of dealing with cases justly and proportionately and allocating to them an appropriate share of the court’s resources.
In this claim the assertion of privilege failed under the second “limb” of the privilege test. The court acknowledged that the litigation was in reasonable contemplation of the parties but decided that the disputed documents were not created for the purpose of obtaining information or advice.
The court did accept that if the information couldn’t be disentangled from privileged content or if a document would otherwise reveal privileged advice the court may uphold an assertion of privilege.
But the judgement highlights that great care and caution should be taken when discussing or recording internal litigation settlement discussion, regardless of whether litigation is already underway or just contemplated by the parties.