WH Holding v E20 Stadium: Court of Appeal holds that litigation privilege cannot be claimed for documents discussing only settlement/considers the test for the court inspecting documents following a challenge to privilege

The appellant appealed against a decision that the respondent had correctly claimed litigation privilege in respect of certain documents. The Court of Appeal has now held as follows:

(1) Litigation privilege cannot be claimed for documents which are concerned with the settlement or avoidance of litigation (which is in contemplation) but which do not seek advice or information for the purpose of conducting litigation or reveal the nature of such advice or information.

For litigation privilege to apply, the relevant communications must satisfy certain conditions, including that they "have been made for the sole or dominant purpose of conducting litigation". As has been recently confirmed by the Court of Appeal in SFO v ENRC, "conducting litigation" includes avoiding or settling litigation. However, that is not a stand-alone condition: instead, any such settlement discussions must be "for the sole or dominant purpose of obtaining information or advice in connection with existing or contemplated litigation". The Court of Appeal noted that "We were not shown any authority which would extend the scope of litigation privilege to purely commercial discussions. In particular we do not consider that ENRC extended the scope of the documents covered by litigation privilege. 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 only possible change attributable to the decision in ENRC was the confirmation that the conduct of litigation includes its avoidance or compromise."

It was accepted that if, in the document in question, advice or information obtained for the sole or dominant purpose of conducting litigation cannot be disentangled, or disclosure would otherwise reveal the nature of such advice or information, litigation privilege can be claimed in respect of that document. Furthermore, the Court of Appeal said that "We cannot see any justification for covering all internal corporate communications with a blanket of litigation privilege". Accordingly, the appeal on this point was allowed.

(2) Although it was no longer necessary to consider the point in light of (1) above, the Court of Appeal also confirmed the correct test to be applied for deciding when a court should inspect documents to ascertain whether they are privileged. Contrary to the approach adopted in West London Pipeline v Total (that it is difficult to challenge an affidavit asserting privilege), the Court of Appeal said that "the power to inspect a document is a matter of general discretion". There was no need for the court to be "reasonably certain" that the test for privilege had been misapplied. However, the court should exercise caution (especially as it is dangerous to look at documents out of context) and should bear in mind the overriding objective of dealing with cases justly and at proportionate cost.

COMMENT: In light of this decision, care should be taken to ensure that any settlement discussions taking place within a company with a view to settling ongoing litigation should not be recorded in written form, to avoid the risk of having to disclose details of those discussions. It might be argued, in any event, though, that a party's view of the value of a claim usually need not be disclosed on the basis that it is not relevant to the underlying dispute.