Court Of Appeal Rejects Claim To Without Prejudice Or Litigation Privilege In Communications Incorporated Into Settlement Agreement

The Court of Appeal has held that the claimant was not entitled to withhold from inspection communications that had been incorporated into a settlement agreement with one of five defendants. That was despite the fact that, at the time they were made, those communications had been protected by the without prejudice rule, and potentially also litigation privilege (on the basis that the claimant's dominant purpose in conducting those communications was to collect evidence against the other defendants): BGC Brokers LP v Tradition (UK) Ltd [2019] EWCA Civ 1937.

The decision is unsurprising in finding that communications incorporated into a settlement agreement thereby lost their without prejudice status. It has long been established that, where a settlement agreement is concluded by the acceptance of a without prejudice offer, the offer ceases to be protected by the without prejudice rule since it forms part of the contract. It seems logical that the same should be true of without prejudice communications incorporated into a settlement agreement.

It is also unsurprising that any litigation privilege in those communications should have been lost as a result of their being incorporated into the settlement agreement. The Court of Appeal's reasoning on this issue may, however, be seen as more novel. The court accepts that the dominant purpose of the original communications may have been to collect evidence, but says that was not the purpose of incorporating them into the settlement agreement, and therefore litigation privilege does not apply. Ordinarily, though, the rule is "once privileged, always privileged" unless privilege is waived or confidentiality is lost - at least insofar as legal advice privilege is concerned (see this post). The present decision may suggest that the same is not true for litigation privilege. As a practical matter, therefore, parties should exercise caution in using material that is subject to litigation privilege for any purpose apart from its original litigation purpose.

Background

The claimant, BCG, brought proceedings against various defendants including Mr Cuddihy, its former employee, in relation to the provision of BCG's confidential information to a competitor.

After proceedings were issued and served, Mr Cuddihy attended interviews with BGC's solicitors which were expressly conducted on a "without prejudice and confidential" basis. Mr Cuddihy's solicitors also sent three emails to BGC's solicitors, again on a...