The Court of Appeal, in WH Holding Ltd & Anor v E20 Stadium LLP, has handed down judgment clarifying the meaning of “conducting litigation” for the purposes of litigation privilege.
The decision highlights the fact that litigation privilege does not necessarily extend to all communications pertaining to a piece of litigation (in this case internal company emails regarding commercial settlement).
The key issue in the case was whether litigation privilege extends to documents which are concerned with the settlement or avoidance of litigation, but which neither seek advice or information for the sole or dominant purpose of conducting litigation, nor reveal the nature of such advice or information. The Court held that litigation privilege did not extend to such documents and rejected the submission that “conducting litigation” encompassed discussions relating to “formulating, finalising and setting out a purely commercial settlement proposal”. In so doing, the Court expressly upheld a decision of the High Court in Excalibur Ventures LLC v Texas Keystone Inc  in which Popplewell J rejected the submission that litigation privilege covered “all documents brought into existence for the dominant purpose of actual or contemplated litigation”.
The Court also confirmed the finding in the recent SFO v ENRC Court of Appeal decision that the ‘conduct of litigation’ includes its avoidance or compromise, but did not consider that the case was authority for extending the scope of litigation privilege to encompass purely commercial discussions. For the privilege to apply, it was necessary that communications were prepared for the sole or dominant purpose of “obtaining information or advice in connection with existing or contemplated litigation”. [Emphasis in the original.]
The Court did, however, accept that a document in which advice or information obtained for the sole or dominant purpose of conducting litigation cannot be disentangled, or a document which would otherwise reveal the nature of such advice or information, would still be covered by litigation privilege.
This decision highlights the risk that not all internal company communications discussing pending/anticipated litigation will necessarily attract litigation privilege, even if they were prepared after the onset of litigation and for the dominant purpose of that litigation. For example, internal documents discussing the commercial approach or strategy to litigation may not be protected unless they contain advice or information obtained for the sole or dominant purpose of conducting the litigation.
The Court’s power to inspect a privileged document
The Court also considered the grounds upon which a Court might be prepared to ‘look behind’ a claim to privilege and inspect controversial documents. In this regard, the Court confirmed that the power to inspect a document is a matter of general discretion, but noted that courts should be cautious about inspecting privileged documents and should be alive to the dangers of looking at documents out of context. They confirmed that 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”. Factors that are relevant to the exercise of this discretion include, but are not limited to:
a) the nature of the privilege claimed;
b) the number of documents involved; and
c) their potential relevance to the issues.
The dominant purpose test – non-adversarial expert determination
Finally, the Court considered the question of whether the documents in dispute were actually created for the dominant purpose of adversarial litigation, as opposed to non-adversarial expert determination, which the Appellant claimed was still a possibility at the time the documents were created.
The Court noted that in circumstances where there are two or more ways in which a dispute may be resolved, one of which is adversarial litigation reasonably in contemplation, the dominant purpose test is met if the information or advice is obtained for the purposes of settling the dispute. It is not necessary to investigate further whether the dominant purpose was in fact the expert determination or the adversarial litigation.