15 February 2019 by

Court of Appeal decides internal documents discussing a commercial proposal for settlement of a dispute are not privileged.

If you are a party to a commercial dispute, a recent decision by the Court of Appeal could affect the documents that can be inspected by your opponent.

As you may know, if you are a party to a dispute, you have a duty to the court to disclose all documents relating to that dispute, whether they support or negatively impact your case. These documents may be inspected by your opponent, unless they are protected by one of the forms of privilege, such as ‘Litigation Privilege’.

The definition of ‘Litigation Privilege’ is not always straightforward.  It comprises communications between a client and a professional legal adviser, or between either of them and a third party, where information is obtained or advice given in relation to litigation that is reasonably contemplated, pending or existing, if the sole or dominant purpose for the communications is litigation.

The definition was further clarified by the court last year when it confirmed that the requirement of ‘advice in contemplation of litigation’ included deciding whether to litigate and whether to settle the dispute giving rise to the litigation.

The Court of Appeal was recently asked to consider whether internal emails and minutes of a meeting between the board members of the respondent company, which discussed a proposal for settlement of the dispute, were protected from inspection by Litigation Privilege or not.

The Court confirmed that advice in contemplation of litigation included its avoidance or compromise. The dominant purpose of those documents was held to be commercial discussions of the potential settlement of the dispute which did not amount to legal advice and should not be protected by Litigation Privilege.

Best practice for companies must be to seek legal advice and take a more cautious approach when creating documents throughout a dispute. If the document does not fall within the definitions of privilege, the document is open for inspection by your opponent which could be damaging to your case.


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