Check your privilege: Court of Appeal’s ruling may limit the practical application of litigation privilege

The Court of Appeal has narrowed the extent to which parties can rely on litigation privilege to avoid the disclosure of confidential documents to an opponent in litigation. The practical effect of this judgment is that parties may now be more likely to be compelled to disclose sensitive documents unless careful steps are taken in advance to protect the position. In this briefing note, Jolyon Connell and Ben Longworth consider the important recent decision in WH Holding Limited & Anr v E20 Stadium LLP [2018] and discuss what in-house lawyers should be doing now to protect themselves against the risk of unexpected and unwanted disclosure orders.

Background

Pursuant to the key (and controversial) ruling of the House of Lords in the Three Rivers (No6) case, a party is able to resist disclosure of a document on the basis that:

"...communications between parties or their solicitors and third parties for the purposes of obtaining information or advice in connection with contemplated or existing litigation are privileged but only when the following conditions are satisfied: (a) litigation must be in progress or in contemplation; (b) the communications must have been made for the sole or dominant purpose of conducting that litigation; and (c) the litigation must be adversarial, not investigative or inquisitorial."

This became the test of whether a document could be withheld from disclosure on the basis of litigation privilege. For many, this was taken to mean that if a document satisfied criteria (a)-(c) above, litigation privilege would apply. However, the WH Holding judgment (handed down by the Court of Appeal on 30 November 2018) means that the scope of litigation privilege is now significantly narrower than many had previously considered.

Judgment

The Court of Appeal made it clear that for litigation privilege to apply it is not sufficient for a document only to satisfy criteria (a)-(c); it must also (and more fundamentally) satisfy the test that it must be "for the purposes of obtaining information or advice in connection with contemplated or existing litigation". This clarification is very significant as it means that, rather than being a definition of litigation privilege, criteria (a)-(c) are necessary but not sufficient for litigation privilege to apply. Documents will only be protected if they were created for the purpose of obtaining information or advice about litigation. Documents created for the dominant purpose of "conducting litigation" in the broader sense will not be protected.

Key issues for in-house lawyers

Some scenarios will remain unaffected by this judgment. In particular, parties obtaining advice from their solicitors should still be able to rely on legal advice privilege generally and litigation privilege specifically (provided the advice is in connection with the litigation). Similarly, parties or their solicitors should still be able to benefit from litigation privilege if they are discussing issues with third parties with a view to obtaining information for the dominant purpose of the litigation.

However, in other common scenarios the documents created are very unlikely to benefit from litigation privilege. For example:

(i) the written minutes of a Board of Directors discussing litigation strategy generally or a settlement strategy specifically; and/or
(ii) a party's internal email communications which make reference to the conduct of the litigation;

will not be litigation privileged - as they are not prepared "for the purposes of obtaining information or advice" about the litigation. It will be very alarming indeed for parties to litigation (and their in-house lawyers) to find that these sorts of hugely sensitive documents may now be liable to be disclosed.

More helpfully, the judgment contained two lifeboats which may yet rescue parties seeking to rely on litigation privilege. The Court of Appeal accepted that litigation privilege would still apply to documents: (a) in which the information or advice obtained for the dominant purpose of the litigation cannot be disentangled; and/or (b) which would otherwise reveal the nature of the information or advice provided.

What should in-house lawyers do now?

Given the myriad of different documents and situations in which issues of litigation privilege may arise and the stringency of the criteria which will now be imposed by the Court in determining whether it applies, it is difficult to identify general rules that will guarantee that any particular document will benefit from litigation privilege. However, the following actions should help reduce the risk of being required to make unwelcome disclosures:

1. Ensure that those key business personnel who are most likely to create sensitive documents relating to litigation are aware of the fact that litigation privilege will not attach to those documents unless they are produced for the purpose of obtaining information or advice about the litigation. Reinforce the message that privilege is a complex and potentially important area on which the business should seek clarification from the in-house lawyer(s) before taking steps which cannot later be rectified.

2. If possible, limit internal email correspondence concerning the conduct of the litigation. If discussions (other than solicitor-client discussions) can be conducted in person or on the telephone, that will reduce the risk of sensitive information being recorded in a disclosable document.

3. The more steps that you can take to entangle a document with information or advice previously obtained, the less likely that document will become disclosable. Similarly, references to information or advice which is privileged should also increase the chances of a document itself becoming privileged. Where possible, any documents which consider key litigation issues - such as settlement, commercial imperatives, strategy and tactics - should refer explicitly to the content of legal advice received about the issues and/or what further information is required in order to develop the issues further.

If you require further information about anything covered in this briefing, please contact Jolyon Connell (+44 (0)20 3375 7205), Ben Longworth (+44 (0)20 3375 7195) or your usual contact at the firm on +44 (0)20 3375 7000. You can find further information about our Disputes team here.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, December 2018