It is a natural function of a company’s board members to manage and resolve any disputes that may arise. However, following the Court of Appeal decision in WH Holding Ltd v E20 Stadium LLP  EWCA Civ 2652, businesses need to be cautious when discussing their options in resolving a commercial dispute.
In what may come as a surprise to many, the Court of Appeal found in this case that emails between a company’s board members discussing possible commercial proposals for the settlement of a dispute were not covered by litigation privilege.
WH Holding Ltd (“West Ham”) was in dispute with E20 over the number of seats West Ham was entitled to use in the London Olympic Stadium. West Ham asked the court to allow inspection of six emails between E20 board members and between E20 board members and stakeholders. E20 claimed that the emails contained discussion about the potential settlement of the dispute and were therefore privileged.
The High Court ruled the emails were subject to litigation privilege. However, the Court of Appeal overturned this ruling, and in doing so, it said the issue was "whether litigation privilege extends to documents which are concerned with the settlement or avoidance of litigation where the documents neither seek advice or information for the purpose of conducting litigation nor reveal the nature of such advice or information". Unfortunately for E20, it was held that the emails were not for the purpose of obtaining information or advice in connection with the conduct of the litigation and therefore disclosable.
Scope of litigation privilege
The Court of Appeal summarised the scope of litigation privilege as follows:
- Litigation privilege is engaged when litigation is in reasonable contemplation.
- 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 litigation, provided it is for the sole or dominant purpose of the conduct of the litigation.
- Conducting litigation includes deciding whether to litigate and also includes whether to settle the dispute giving rise to the litigation.
- Documents in which such information or advice cannot be disentangled, or which would otherwise reveal such information or advice, are covered by the privilege.
- There is no separate head of privilege which covers internal communications falling outside the ambit of litigation privilege as described above.
The Court of Appeal did not extend the scope of litigation privilege to cover purely commercial issues, which did not fall into the recognised categories of obtaining information or advice.
Practical considerations and tips
In light of the decision in the West Ham case, parties to litigation or potential litigation should exercise great care when producing internal documents, particularly when documents reveal a party’s strategy and what they would be prepared to receive, or pay, to settle a claim. In order to maximise the prospect of litigation privilege applying, individuals within an organisation engaged in litigation should consider taking the following steps:
- limiting written internal communications relating to the matters in dispute to communications only for obtaining advice or information for use in the dispute;
- communicating orally when discussing tactics or settlement; and
- framing commercial settlement discussions as part of the legal advice that has been, or is being obtained from, external solicitors, barristers or in-house counsel.
If organisations are in doubt, they should seek advice from their lawyers at an early stage, before any communications come into existence.
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