A recent ruling in West Ham v E20 has clarified the scope of litigation privilege and the circumstances in which courts will inspect documents over which privilege has been claimed.
By Daniel Smith and Clare Nida
In a significant decision, the English Court of Appeal has restricted the scope of litigation privilege in relation to purely commercial communications (even if connected to the litigation), and has clarified the grounds upon which a judge might be prepared to inspect disputed documents.
In light of West Ham United v E20 Stadium (No. 2)  EWCA Civ 2652, companies should exercise caution when disseminating documents, information, and communications amongst non-lawyers even in litigious matters. They should seek English law advice if any matters may involve litigation in the English court, as the court may not find that they attract litigation privilege.
The case concerned a dispute between West Ham and the owners of its stadium, E20, involving the number of seats in the stadium that West Ham is entitled to use. E20 asserted litigation privilege over certain documents on the basis that each was 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. West Ham applied for the court to inspect a sample of six redacted emails passed between the Board members of E20 and between E20 Board members and stakeholders.
Mr Justice Norris rejected the application at first instance, relying on an interpretation of SFO v ENRC  EWCA Civ 2006 that legal advice given to avoid or settle litigation was as much protected by litigation privilege as advice given to defend litigation. (For further details on the decision, see Latham’s previous blog post and Client Alert.)
The Court of Appeal unanimously allowed the appeal and held that the documents in question were not subject to litigation privilege.
Scope of Litigation Privilege
The modern test for litigation privilege as set out in Three Rivers requires that:
- Litigation must be in progress or reasonably in contemplation.
- The communications must have been made for the sole or dominant purpose of conducting that litigation.
- The litigation must be adversarial, not investigative or inquisitorial.
The Court of Appeal held that ENRC did not remove the requirement that a communication must be for the dominant purpose of conducting litigation, but emphasised the communication must concern the procurement of advice or evidence. The court therefore rejected E20’s submission that “conducting litigation” encompasses communications that comprise purely commercial discussions. On the facts of this case, the relevant documents were internal documents relating only to the commercial attractiveness of a settlement rather than designed to procure advice or evidence. However, the court did not overturn ENRC as authority for the proposition that “conducting litigation” included settlement (or avoidance) of litigation. The court also rejected the argument that litigation privilege applies to all internal corporate communications merely because they were internal.
The Court of Appeal summarised its findings on the scope of litigation privilege:
- 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 the litigation, provided it is for the sole or dominant purpose of the conduct of the litigation.
- Conducting the 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 held that the inspection of documents that are the subject of a challenged claim to privilege is a matter of general discretion. The test is not, as the Respondent argued, whether the court is “reasonably certain” litigation privilege has been misapplied. Rather, a wider formulation was favoured: the court should, in the cautious exercise of its discretion, take into account the nature of the privilege claimed, the number of documents involved, and the documents’ potential relevance to the issues.
West Ham is the latest in a number of decisions on the scope of legal professional privilege this year. Other recent rulings include Financial Reporting Council v Sports Direct, in which the High Court found that privilege does not protect the production of documents by a regulated person for a regulator. With permission to appeal granted in Sports Direct, development of litigation privilege looks set to continue.
Latham & Watkins will continue to monitor and report on related legal developments.
This post was prepared with the assistance of Alexandar Vukadinovic in the London office of Latham & Watkins.
Submit a comment about this post to the editor.