ICAEW.com works better with JavaScript enabled.

Case law: Party to dispute may have to disclose internal emails and other communications, as well as those with third parties, to the other side

Parties in litigation, or in a dispute where litigation is reasonably contemplated, should consider whether internal emails and/or other communications discussing commercial solutions to their dispute, and correspondence with external experts, may have to be disclosed to the other side following two recent rulings.

January 2019

This update was published in Legal Alert - January 2019

Legal Alert is a monthly checklist from Atom Content Marketing highlighting new and pending laws, regulations, codes of practice and rulings that could have an impact on your business.

In one case, a landlord company was in a dispute with a football club tenant over how many seats the club was entitled to use at a former Olympic stadium. Both acknowledged the dispute could end up in court.

Directors of the landlord sent emails to each other and to other stakeholders, in which they discussed possible commercial solutions to the dispute. The emails were not sent for the purpose of obtaining legal advice or for potential litigation.

Legal proceedings started and the club asked the court to read the landlord’s emails to determine if they were protected by litigation privilege. Privilege applies to communications entered into for the dominant purpose of conducting a legal dispute, at a time when litigation has either started or can reasonably be contemplated as an outcome of the dispute. If it applies, the relevant communications need not be disclosed to the other side.

The Court of Appeal ruled that litigation privilege only protects communications between clients or their solicitors and third parties whose sole or dominant purpose is to obtain information or advice in relation to the conduct of the litigation (including deciding whether to go to court and whether to settle). It said there was no rule saying that internal communications discussing commercial solutions to a legal dispute were protected per se. They were only protected if litigation was in the reasonable contemplation of both parties, and either:

  • their sole or dominant purpose was to obtain information and advice in relation to the conduct of litigation; or
  • if disclosed, they would reveal the nature of any such information or advice.

In this case, however, the discussions were not solely or predominantly for that purpose, and their disclosure would not reveal the nature of any such information or advice. The emails were not therefore protected by litigation privilege.

In a separate case, an auction house sold a painting for a client on terms that it would refund the sale price to the buyer if it received written evidence that the painting was a fake.

The buyer later claimed it was a fake so the auction house instructed an expert to examine it, telling the expert that the instructions would not involve the expert giving evidence. The expert verbally reported that he thought it was fake. The auction house then instructed him to provide a written report, because:

  • a written report was required under the terms of the agreement with the buyer before the auction house could refund the sale price; and
  • the report would help it decide its strategy in potential litigation.

The auction house also commissioned another expert to give a second opinion, for the same reasons. It also instructed solicitors in relation to the dispute anticipated to recover the sale price from its client.

Both the written report and the second expert’s opinion said that the painting was probably fake, so the auction house refunded the purchase price to the buyer and then claimed it back from the client.

The client asked to see the correspondence between the auction house and the experts, but the auction house refused, claiming litigation privilege. However, the client argued that litigation privilege did not apply because the dominant purpose of the correspondence was not the conduct of the litigation, but to find out whether it was obliged to refund the buyer under the terms of the sale.

The High Court found that the auction house had entered into the correspondence with the experts for two purposes: to find out whether it was obliged to refund the buyer and in connection with the conduct of the litigation. However, the two were of equal importance, so the auction house could not argue that the conduct of the litigation was the sole or dominant purpose of the correspondence, as required in order for litigation privilege to apply.

Litigation privilege did not therefore apply, and the auction house was obliged to disclose its correspondence with the experts.

Operative date

  • Now

Recommendation

  • Parties to litigation or a dispute where litigation is reasonably contemplated, should be aware that internal emails and/or other communications discussing commercial solutions to their dispute, and correspondence with external experts, may not be covered by litigation privilege, so may have to be disclosed to the other side

Case ref: WH Holding Ltd v E20 Stadium LLP (No. 2) [2018] EWCA Civ 2652
               Sotheby’s v Mark Weiss Limited & Others [2018] EWHC 3179

Disclaimer: This article from Atom Content Marketing is for general guidance only, for businesses in the United Kingdom governed by the laws of England. Atom Content Marketing, expert contributors and ICAEW (as distributor) disclaim all liability for any errors or omissions.

Copyright © Atom Content Marketing