Internal Settlement discussions

You might be horrified to discover that some internal management or Board level discussions around settlement of claims may actually be something that you would have to disclose in litigation. A case in the Court of Appeal involving West Ham United Football Club brought out this issue. It related to six emails that were passed between Board members of a stadium company with the dominant purpose of discussing a commercial settlement of a dispute when litigation with West Ham was in contemplation. The issue for the court was whether management of the stadium company could inspect those emails as part of the litigation process.

The Judges summarised litigation privilege and how it works:

1. It is engaged when litigation is in reasonable contemplation.

2. It is engaged and 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’s no separate head of privilege which covers internal communication falling outside the ambit of litigation privilege as already described in points 1-4 above.

Aside from litigation privilege, advice privilege applies to confidential communications passing between a client and their lawyer and brought into existence for the purpose of giving or receiving legal advice about what should prudently and sensibly be done in the relevant legal context.

The problem the company involved had with their emails, is that they were internal communications in which a commercial settlement was being discussed but it didn’t involve obtaining information or advice within the ambit of litigation privilege.

Had the parties actually made a “without prejudice” offer then the documents would not have come before the court.

This creates a weird gap –recording the terms proposed around that offer or authorising the making of the offer could be open to inspection and inclusion but the offer itself wouldn’t!

What can you do to mitigate the effects of this decision?

* It may be better to have a face to face discussion rather than document what you are discussing in written form.

* Mark internal documents which relate to such discussions with ‘without prejudice’.

* Involve your lawyer and include them in any such correspondence, as long as you’re actively intending them to get involved in the conversation. You can also obtain legal advice even if it is preliminary advice at an earlier stage as possible so that any settlement discussions may be informed by and include references to the legal advice that has been obtained.