Maintaining boardroom privilege

11 Mar 2019

Company directors might assume that any internal Board correspondence regarding the proposed settlement of Court proceedings would be covered by litigation privilege, meaning that those documents would not need to be disclosed to the other side. However a recent case involving West Ham Football Club and London Olympic Stadium confirmed that not all such internal communications are privileged from disclosure, so extreme care must be taken when creating internal documents.

The underlying dispute in WH Holding Ltd v E20 Stadium LLP concerned the number of seats West Ham was entitled to use in the London Olympic Stadium for its home matches under a contract between the club and E20 Stadium LLP. During the course of proceedings, E20 claimed litigation privilege over a number of emails between the E20 Board members and their stakeholders recording commercial discussions over the settlement of the litigation. Their claim to privilege in those documents was challenged by West Ham.

The Court of Appeal confirmed that litigation privilege applies when litigation is in reasonable contemplation. It covers communications between parties and their solicitors, or between either of them and a third party, 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. The Court of Appeal confirmed in this case that the “conduct of the litigation” includes whether to litigate or to settle the dispute.

E20 attempted to argue that all internal corporate communications are covered by litigation privilege, but this received short shrift from the Court of Appeal (which questioned why corporations should be afforded blanket privilege and greater protection than, for example, a body of trustees or a partnership).

In this case, the Court of Appeal found that the test for litigation privilege was not satisfied because the E20 emails recorded purely commercial discussions regarding settlement which were not “for the purpose of obtaining information or advice”. The Court of Appeal nevertheless accepted that if it was not possible to “disentangle” privileged material from non-privileged material then the whole document would be privileged from disclosure. Similarly, if the content of the non-privileged document would reveal the nature of the privileged information or advice, then it would also be covered.

It cannot therefore be assumed that all Board communications concerning litigation are covered by litigation privilege and the requirements of the test must first be satisfied. Company directors and board members should accordingly take care when creating documents (such as memos, board minutes and emails) which refer to litigation and/or settlement strategies.

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