UK: Court Of Appeal Finds Litigation Privilege Is Restricted To The Purpose Of Obtaining Advice Or Information, Not The Conduct Of Litigation More Broadly

Last Updated: 7 December 2018
Article by Herbert Smith Freehills

The Court of Appeal has held that emails between a company's Board members which had been prepared to discuss a commercial proposal for the settlement of a dispute were not covered by litigation privilege: WH Holding Ltd v E20 Stadium LLP [2018] EWCA Civ 2652.

The court found that, to fall within litigation privilege, a communication must be prepared for the dominant purpose of obtaining advice or evidence in relation to the conduct of litigation. It is not sufficient that it is for the dominant purpose of conducting litigation, in a broader sense. This is a point that had previously been unclear in the case law.

The court did not consider that the recent high profile decision in SFO v ENRC [2018] EWCA Civ 2006 (considered here) extended the scope of litigation privilege beyond the recognised categories of advice or evidence, though the decision confirmed that the conduct of litigation includes its avoidance or compromise. The court in the present case added (perhaps tellingly):

"We do not consider that there is any justification for extending the scope of litigation privilege in that respect. It has always been recognised that privilege is an inroad into the principle that a court should be able to decide disputes with the aid of all relevant material."

The decision is likely to lead to difficulties in the application of litigation privilege in practice, as there may be many communications or documents which are for the purpose of conducting litigation (including avoiding or settling litigation) but which do not fall within the category of obtaining advice or evidence. The court did accept, however, that litigation privilege will apply if advice or information obtained for the conduct of litigation cannot be disentangled from a document, or it would otherwise reveal the nature of such advice or information.

The decision may also suggest that litigation privilege is restricted to communications between parties or their lawyers and third parties, rather than applying to internal communications within a party. This part of the decision is not however clear, and it is difficult to see why litigation privilege should be restricted in this regard, so long as a communication or document is prepared for the required purpose. It may be that the Court of Appeal is merely dismissing an argument that litigation privilege applies to all internal corporate communications relating to litigation even if they fall outside the required purpose.

Finally, the decision also suggests that the courts may adopt a more liberal approach to the question of when they should inspect documents to ascertain whether they are privileged, when a claim to privilege is challenged.

Background

The underlying dispute in this case between West Ham and its landlord, E20, related to the number of seats in the London Olympic Stadium that West Ham is entitled to use.

This appeal related to West Ham's challenge to E20's claim to privilege over six emails, all dated 30 January 2017, passing between E20 Board members, and between E20 Board members and stakeholders. E20 asserted privilege on the basis that the emails were composed with the dominant purpose of discussing a commercial proposal for the settlement of the dispute at a time when litigation was in reasonable contemplation.

The High Court (Norris J) dismissed West Ham's application for the court to inspect the documents over which privilege was claimed, and upheld the claim to privilege (see decision here). Permission to appeal was granted on various grounds, including: whether the scope of litigation privilege is restricted to documents concerned with obtaining advice or evidence for the conduct of litigation; and the approach the court should take to an application for it to inspect documents where a claim to privilege is challenged.

Decision

The Court of Appeal (Sir Terence Etherton MR, Lord Justice Lewison and Lady Justice Asplin) allowed the appeal, finding that E20's claim to privilege over the emails was not well-founded.

Scope of litigation privilege

The Court of Appeal said that the real issue raised by the appeal as to the scope of litigation privilege was whether it extends to documents which neither seek advice or information for the purpose of conducting litigation nor reveal the nature of such advice or information. In other words, does litigation privilege cover documents prepared for the dominant purpose of "conducting litigation" in a broader sense?

Norris J had rejected West Ham's submission that litigation privilege was limited to documents concerned with obtaining advice or evidence for use in litigation, referring to ENRC in which the Court of Appeal found that litigation privilege covered the purpose of avoiding or settling reasonably contemplated proceedings.

The Court of Appeal disagreed, finding that ENRC did not remove the requirement that a communication must be concerned with obtaining advice or evidence, though the decision clarified that obtaining advice or evidence to avoid or settle litigation was included within the privilege (just as obtaining advice or evidence to defend litigation).

The court in the present case rejected E20's submission that the phrase "conducting litigation" went beyond obtaining advice or evidence and encompassed discussions relating to formulating, finalising, and setting out a purely commercial settlement proposal. The court referred to Lord Carswell's authoritative statement of the scope of litigation privilege in Three Rivers No 6 [2004] UKHL 48, where he said:

"... communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation are privileged, but only when the following conditions are satisfied: (a) litigation must be in progress or in contemplation; (b) the communications must have been made for the sole or dominant purpose of conducting that litigation; (c) the litigation must be adversarial, not investigative or inquisitorial."

The fallacy in E20's argument, the Court of Appeal said, was to treat sub-paragraph (b) as being an extension to the general proposition that litigation privilege covers communications for the purpose of obtaining information or advice. In fact, the court said, it is a qualification or restriction on the width of that principle.

The court did not consider that ENRC extended the scope of litigation privilege, noting that the disputed documents in that case all fell within the recognised categories of advice or information going to the merits of the contemplated litigation.

The court also accepted, however, that even if the dominant purpose is not obtaining advice or information to conduct litigation, litigation privilege would also attach to a document in which advice or information obtained for that purpose "cannot be disentangled", or a document which would "otherwise reveal the nature of such advice or information".

Finally in relation to the scope of litigation privilege, the Court of Appeal referred to E20's submission that there was privilege for internal communications within a corporate body, relying on the decision of Pearson J in Mayor and Corporation of Bristol v Cox (1884) 26 Ch D 678. In that case, the court upheld a claim for privilege in the minutes of meetings of local authority committees referring to contemplated or existing litigation to which the authority was a party. Pearson J said that a man's notes with reference to his own conduct in litigation are privileged, and that the notes of a committee established by a corporation to deal with litigation should be similarly protected.

In the present case, the Court of Appeal commented that no authority was cited in support of this part of Beatson J's decision, which appeared to find that the reports were protected either because they were confidential or because the committee was simply the agent of the corporation. The Court of Appeal commented:

"We cannot see any justification for covering all internal corporate communications with a blanket of litigation privilege. Quite apart from anything else we do not see why corporations should have greater protection than, say, partners or bodies of trustees who in practice are equally likely to discuss matters among themselves. Nor is the fact of agency sufficient of itself to attract litigation privilege. ... In our judgment Bristol v Cox is wrong on this point and should be overruled."

The Court of Appeal summarised its conclusions on the scope of litigation privilege as follows:

  1. Litigation privilege is engaged when litigation is in reasonable contemplation.
  2. Once litigation privilege is engaged it covers communications between parties or their solicitors and third parties 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 the conduct of the litigation.
  3. Conducting the litigation includes deciding whether to litigate and also includes whether to settle the dispute giving rise to the litigation.
  4. Documents in which such information or advice cannot be disentangled or which would otherwise reveal such information or advice are covered by the privilege.
  5. There is no separate head of privilege which covers internal communications falling outside the ambit of litigation privilege as described above.

Inspection by the court

Although it was not strictly necessary to its decision, the Court of Appeal went on to consider the appropriate test for deciding when a court should inspect documents to ascertain whether they are privileged, as the point had been fully argued before it. It noted that there is an express power for the court to inspect documents where there is a challenge to a claim to privilege. That power is now contained in CPR 31.19(6).

The Court of Appeal said that the judge had been wrong to find that the court's power of inspection was limited to cases in which (without sight of the documents in question) the court is "reasonably certain" that the test for privilege has been misapplied. The court disagreed with the narrow formulation of the test, set out by Beatson J in West London Pipeline and Storage v Total UK [2008] 2 CLC 258 which is often cited on this point.

Instead, the Court of Appeal held, the court has a wide discretion to inspect the documents over which privilege is claimed to see whether the test has been correctly applied, although it should be cautious about doing so and should be alive to the dangers of looking at documents out of context. The discretion must be exercised in accordance with the overriding objective. Among the factors that will be relevant are (a) the nature of the privilege claimed (b) the number of documents involved and (c) their potential relevance to the issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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