When your settlement discussions will be disclosable to your opponent

It would be a mistake to think that all settlement discussions are protected from being provided to your opponent on the grounds of privilege, as a recent case illustrates

11 December 2018

Boardrooms beware: not all communications concerning ongoing litigation are automatically protected by privilege against disclosure to an opponent. The Court of Appeal recently rejected an organisation’s assertion that emails discussing a commercial proposal for settling a dispute must be privileged and ordered that they be provided to the opponent.

The case is an illustration of the pitfalls of knowing a little, but not knowing enough. Experienced users of legal services are usually well aware of the concept of ‘privilege’ in litigation. They know it can provide a shield against having to provide documents they would otherwise be obliged to give their opponents as part of the litigation process. They also know it relates to documents concerning litigation, and might therefore naturally assume it would extend to internal discussions about settling a claim. In some cases they would be right; but it would be a mistake to assume all such documents will always be privileged just because they were created in the course of the litigation.

For a communication to be covered by litigation privilege it must be both:

  1. created at a time when adversarial litigation was reasonably contemplated or actually in progress
  2. made for the (sole or dominant) purpose of obtaining information or advice in connection with that litigation.

The mistake made by the organisation in this case was that, by its own admission, its internal emails were for 'the dominant purpose of discussing a commercial settlement of the dispute'. It thought this was enough to merit privilege protection. The Court rejected this because emails that are about a purely commercial settlement proposal are not documents for the purpose of obtaining information or advice. The emails failed limb two of the test. In fact, even if the emails had included reference to legal advice (perhaps underpinning the commercial terms it was willing to offer), provided those references could be blanked out then the remainder of the document might still be non-privileged and disclosable to the opponent.

What does this mean for litigants?

The result in this case is not a reason to panic. The case concerned a narrow class of documents (internal emails on purely commercial aspects of settlement). It does not establish a wider precedent. But it is a reminder to exercise caution, especially when creating purely internal documents, as the test for litigation privilege is not as broad as some might expect. It is perhaps also a reminder that sometimes it is better to put pens and keyboards down and avoid creating documents in the first place. However, where such a document is needed, an organisation might be well warned to obtain instructed solicitors’ advice on the likelihood of whether it will attract the protection of privilege before they create it.

It is also worth noting why this got to court in the first place. Judges are increasingly willing to entertain challenges to privilege. Gone are the days when Courts were reticent to look beyond a blanket statement that 'these documents were created in the conduct of litigation and are privileged from disclosure'. Parties should anticipate that assertions of privilege may well be scrutinised in greater detail than before. 

The Court in this case (tellingly) stated that, as a matter of principle, 'a court should be able to decide disputes with the aid of all relevant material' and that 'It has always been recognised that privilege is an inroad into [this] principle'. In this case, the assertion of privilege was an inroad too far.

Case: WH Holding Ltd & Anor v E20 Stadium LLP [2018] EWCA Civ 2652 (30 November 2018)

Author: The author, Lloyd Nail, is a Senior Associate in Burges Salmon’s Dispute Resolution team. 

Key contact

David Hall

David Hall Partner

  • Head of Dispute Resolution
  • Banking Disputes
  • Fraud and White Collar Crime

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