Court of Appeal Flags Privilege Claim Offside - Joseph Sullivan

Tue, 04 December, 2018

In the recent case of West Ham v E20 the Court of Appeal delivered a judgment clarifying the scope of litigation privilege in the light of SFO v ENRC and explained when a Judge should inspect controversial documents.

In this important decision, which was the first televised appeal in the Court of Appeal, limits were set on the scope of litigation privilege and the circumstances in which a Judge may inspect a document over which a claim for privilege were expanded.

Background

The claim concerned a dispute between West Ham United and the owners of their stadium, E20. West Ham wished for the match-day capacity of the stadium to be increased and contended that it had a contractual right that E20 must act in good faith in deciding whether to make an application for permission for the increased capacity. E20 disputed this obligation but argued in the alternative that it had, in any event, acted in good faith as it had decided not to increase the stadium’s capacity due to legitimate safety concerns.

Accordingly, the reason for E20’s decision not to apply to increase the permitted match-day capacity of the stadium was an important issue in the claim: West Ham contended that the real reason for E20’s decision was that it wished to use the issue to seek to extract commercial advantages in negotiations with the club.

E20 had asserted litigation privilege over the only contemporaneous documents evidencing its decision-making process, stating that those six documents were composed with the dominant purpose of discussing a commercial settlement of the dispute between the parties at a time when litigation was in reasonable contemplation.

West Ham challenged this assertion of privilege, contending that the documents cannot have been concerned with obtaining information or advice for use in the litigation and so could not fall within the scope of litigation privilege. They requested an order that the Judge inspect the documents to ascertain whether the assertion of privilege was sound.

First instance decision

At first instance, Norris J refused West Ham’s application in connection with the six documents. He held, in reliance on the recent Court of Appeal decision in ENRC v Serious Fraud Office, that litigation privilege was not limited to documents concerned with obtaining information or advice for use in the litigation but also included any document prepared for the purpose of settling or avoiding a claim.

He went on to hold, following the guidance set down by Beatson J in the West London Pipeline case, that he could only inspect the documents if he was reasonably certain that the test for privilege had been wrongly applied by E20’s solicitors.  Since he was not reasonably certain that this was the case, he found that he could not inspect the documents.

Norris J granted West Ham permission to appeal to the Court of Appeal and the appeal was expedited since the trial of the claim was due to commence less than four weeks after Norris J’s decision.

Court of Appeal decision

A unanimous Court of Appeal (the Master of the Rolls, Lewison and Asplin LJJ) allowed West Ham’s appeal.

The Court analysed its earlier decision in ENRC and held that this did not expand the scope of litigation privilege to encompass documents which neither seek advice nor information for the purpose of conducting litigation. It held that ENRC only clarified that settling litigation formed part of conducting litigation. The requirement that the documents must be concerned with obtaining information or advice remains.

It rejected E20’s argument that “conducting litigation” encompassed documents which merely comprised discussions as to a commercial settlement of that litigation. It also rejected its suggestion that internal communications within a company which are made for the dominant purpose of conducting litigation are, without more, necessarily subject to privilege, and overruled the earlier decision of Mayor and Corporation of Bristol v Cox.

The Court provided a useful summary of the scope of litigation privilege:

  1. Litigation privilege is engaged when litigation is in reasonable contemplation
  2. 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.
  3. Conducting the litigation includes deciding whether to litigate and also includes whether to settle the dispute giving rise to the litigation.
  4. Documents in which such information or advice cannot be disentangled or which would otherwise reveal such information or advice are covered by the privilege.
  5. There is no separate head of privilege which covers internal communications falling outside the ambit of litigation privilege as described above.

The Court also examined the circumstances in which a Judge should inspect a document to test a challenged assertion of privilege. It considered that the formulation set out in all the leading textbooks, taken from West London Pipeline, was too narrow. The power to inspect is not limited to cases in which, without sight of the documents in question, the court is “reasonably certain” that the test for litigation privilege has been misapplied. Instead, the Court has a broader discretion to inspect, though the power should be exercised cautiously. In exercising its discretion, the Court should taken into account the nature of the privilege claimed, the number of documents involved and their potential relevance to the issues.

Paul Downes QC and Joseph Sullivan acted for West Ham in the Court of Appeal, instructed by Neil Warner, Gateley Plc. 

> download a copy of the judgment

Joseph Sullivan

Joe specialises in commercial law, banking and finance, commercial fraud and professional negligence. He is recommended as a leading junior in the Legal 500 for banking & finance. He often appears unled against silks and has a particular specialism in multi-jurisdictional disputes both in court and in arbitration and in claims involving both personal and proprietary remedies. This year his instructions have included acting for the Malaysian government in respect of the 1MDB fraud, one of the most notorious and largest kleptocracy claims to come before the English courts, appearing as lead counsel for the respondent in the Supreme Court in Takhar v Gracefield Developments - an appeal to determine the test for setting aside a judgment on grounds that it was procured by fraud and acting for West Ham United in the Court of Appeal in its claim against the operators of its stadium.

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joseph.sullivan@quadrantchambers.com