In my earlier blog today, I said that there had been two cases post the ENRC decision which have had to consider further issues concerned with litigation privilege. The second of these decisions is the Court of Appeal’s in WH Holding Limited and West Ham Football Club Limited v E20 Stadium LLP  EWCA Civ 2652, a dispute concerned with the club’s stadium rights at the former Olympic Stadium in London. Here, an important issue arose as to a trap that a client can fall into when undertaking an internal discussion of settlement proposals arising from litigation. The lesson seems to be that these must be conducted with a lawyer present.
Norris J. had held that 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. The documents concerned comprised six emails passing between the Board members of E20 and between E20 Board members and stakeholders. E20 asserted that the emails were composed with the dominant purpose of discussing a commercial proposal for the settlement of the dispute with West Ham in relation to its stadium rights at a time when litigation was in reasonable contemplation.
Norris J. held that not to accord these emails with privilege would be odd, since if E20 made a “without prejudice” offer to West Ham to dispose of the impending litigation then that document would not be before the Court in any subsequent case; but any document (not passing between solicitor and client) recording the terms of the proposed offer, or recording discussion of the offer, or authorising the terms and putting of the offer would be open to inspection and to inclusion in the trial bundle. He added: “It is even odder if the discussion within the board of a corporate party arises during the trial itself: can it really be the case that that party (under its ongoing disclosure obligation) is bound to disclose to its opponent documents recording its settlement strategy because they are not covered by litigation privilege? I do not think that can be right.”
The CoA (Sir Terence Etherton MR, Lewison and Asplin LJJ) disagreed, by reference to Lord Carswell’s summary of the scope of litigation privilege in Three Rivers (No 6)  UKHL 48,  1 AC 610. Here, he had 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 CoA agreed that “conducting litigation” encompassed avoiding or settling litigation – as the CoA had made clear in ENRC (at ) where it had stated:
“In both the civil and the criminal context, legal advice given so as to head off, avoid, or even settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.”
However, they held that the fallacy in E20’s argument was to treat sub-paragraph (b) as being an extension to the general proposition that Lord Carswell had formulated. To the contrary, the proposition that it must be for the sole or dominant purpose of conducting the litigation (including settling it) was a restriction on that principle, consistent with authority such as Wheeler v Le Marchant (1881) 17 Ch D 675 at 681 where the Court had said that documents were protected by privilege:
“… where they have come into existence after litigation commenced or in contemplation, and when they have been made with a view to such litigation, either for the purpose of obtaining advice as to such litigation, or of obtaining evidence to be used in such litigation, or of obtaining information which might lead to the obtaining of such evidence…”
While noting that it would accept that a document in which advice or information obtained for the sole or dominant purpose of conducting litigation could not be disentangled, or a document which would otherwise reveal the nature of such advice or litigation, would itself be covered by litigation privilege, there was no justification for extending the scope of litigation privilege as E20 had submitted. Otherwise, the CoA emphasised that there is no separate head of privilege which covers internal communications falling outside the ambit of litigation privilege as described above.
This is an important decision because it means parties must take care when discussing settlement proposals to ensure that either these fall within the ambit of litigation privilege in the narrow sense discussed by the CoA or are addressed in discussions with lawyers and so fall within the ambit of legal advice privilege.
With this ruling, the CoA’s observations on an inspection issue were strictly obiter, but because they do not agree with what most practitioners had thought was a now long-established approach to when a court should inspect documents over which there is a privilege dispute, these need to be carefully considered.
For over 10 years, Beatson J.’s decision in West London Pipeline and Storage Ltd v Total UK  2 CLC 258 has been the accepted authority as to the options open to a court when privilege is disputed. In particular, Beatson J. had held that there needed to be reasonable certainty that a claim to privilege was erroneously made before a Court should inspect, and that “inspection should be a solution of last resort, in part because of the danger of looking at documents out of context at the interlocutory stage. It should not be undertaken unless there is credible evidence that those claiming privilege have either misunderstood their duty, or are not to be trusted with the decision making, or there is no reasonably practical alternative.”
The CoA did not like this, holding that:
“It seems to us that, contrary to Beatson J’s narrow formulation contained in [86(3) and (4)(c)] of the West London Pipeline case, as the Court of Appeal identified in [earlier authorities] the power to inspect a document is a matter of general discretion. That was also the approach of Lord Denning MR in Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No. 2)  2 QB 102 at 130D-H. It is not limited to cases in which (without sight of the documents in question) the court is “reasonably certain” that the test has been misapplied.”
“The court may inspect the documents in relation to which privilege is claimed in order 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, which requires balancing dealing with cases justly, proportionately and at proportionate cost and allocating an appropriate share of the court’s resources. Among the factors which will be relevant to the exercise of the discretion are (a) the nature of the privilege claimed (b) the number of documents involved and (c) their potential relevance to the issues. The cases relied upon by E20 … may provide useful guidance on how the discretion might be exercised in different circumstances but are not prescriptive and, to that extent, we do not agree with Beatson J. As a result, we consider that the Judge was wrong to apply the test of “reasonable certainty” when approaching the question of whether to inspect the Disputed Documents.”
This is an important change and is one that is likely to have real relevance once the new Disclosure Practice Direction comes into force next month. Para 14.3 of that PD Now provides: “The court may inspect the document or samples of the class of documents if that is necessary to determine whether the claimed right or duty exists or the scope of that right or duty.”
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.