Litigation privilege not applicable to internal purely commercial discussions concerning settlement

Litigation privilege not applicable to internal purely commercial discussions concerning settlement

Litigation privilege is restricted to documents concerning legal advice or information sought for the purpose of conducting litigation, it will not cover internal purely commercial discussions concerning settlement of that dispute, according to the Court of Appeal in WH Holding Ltd-v-E20 Stadium LLP [2018] EWCA Civ 2652.

WH Holding was in litigation with E20, and WH Holding wanted to see emails passing between E20’s board members, and between those board members and E20 stakeholders, which discussed commercial proposals for settlement of that dispute. E20 refused, claiming litigation privilege. Litigation privilege applies to a confidential communication between a client and its lawyer, or between either of them and a third party, or a confidential document created by or on behalf of the client or the lawyer, which is made for the dominant purpose of litigation which is pending, reasonably contemplated or existing.

At first instance E20’s claim to litigation privilege was upheld by the court on the basis that the dominant purpose of the emails was litigation, as settlement is within the conduct of litigation. The Court of Appeal overturned this decision, however, holding that the dominant purpose must be for obtaining advice or information in connection with the litigation (this being the test set out by the Supreme Court in Three Rivers v Bank of England (No 6) [2004] UKHL 48 (Three Rivers)). In its view, there was no justification to extend the scope of litigation privilege to include purely commercial discussions about the litigation.

Parties to a dispute therefore need to be alive to the fact that internal purely commercial discussions concerning settlement proposals are not covered by litigation privilege and so may be seen by their opponents during court proceedings, unless such commercial discussions cannot be disentangled from advice or information or where the discussions reveal the nature of legal advice given or the information provided.

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