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Common Interest Privilege

Newsletter 29 April 2010

Those who have sought legal advice or have been involved in litigation will be familiar with the concept of legal professional privilege. A client can claim legal professional privilege over confidential communications or documents which have been made or prepared for the dominant purpose of obtaining legal advice or in relation to proceedings or anticipated proceedings.

However, what happens when that client discloses the confidential communication to a third party with similar interests? For example, if a solicitor, acting for an insured, provides an advice on liability and that insured’s liability insurer requests a copy of that advice; will the insured be able to maintain a claim for privilege if that advice is provided to the insurer?

If the solicitor does not act for the insurer and the insurer is not joined to the proceedings, it will be considered a third party to the lawyer-client relationship between the insured and its solicitor.  Accordingly, any claim for privilege will be lost unless the insurer and insured have a sufficiently common interest in the proceedings.  If the insured has made a claim under its professional indemnity policy for indemnity in relation to the proceedings, this may suffice for the insured and the insurer to have a common interest in the advice on liability. In those circumstances the insured will be able to maintain its claim for legal professional privilege over the advice on the basis that it shares that claim with its insurer.  There is common interest privilege [1].

Although the concept of common interest privilege largely remains undefined, the Courts have taken a relatively strict approach with each case being determined on its own facts [2]. The test is whether there was a sufficiently common interest at the time the document was disclosed, as opposed to when proceedings were actually commenced [3].  A claim will not succeed when the individual interests are selfish and potentially adverse to each other [4].

The parties do not necessarily have to share a common solicitor [5] and the privilege is not restricted to advice obtained in anticipated or actual litigation [6].  It is particularly interesting to note that common interest privilege has taken to apply to disclosure of privileged communications by an insured to its insurer [7].

Common interest privilege no longer exists between parties once they fall into dispute or if their interests are adverse to each other [8].  To further develop the example above, if the liability insurer were to later deny indemnity to the insured client in respect of the proceedings, their interests will now become adverse and the insured client will be unable to maintain a claim for common interest privilege over any privileged documents provided to its insurer in relation to the proceedings.  However, the insured will be able to maintain a claim for common interest in relation to the provision of privileged documents to the insurer prior to the denial of indemnity.

How do parties with a sufficiently common interest maintain common interest privilege in documents or communications? Below are some simple steps parties can take to protect common interest privilege:

  1. where appropriate and the parties have a common interest, retain the same set of solicitors;
  2. avoid mixing legal advice with any non-legal matters or administrative tasks;
  3. do not refer to legal advice in non-legal documents or public statements;
  4. do not refer to legal advice in communications to third parties who do not share a common interest;
  5. when in doubt about whether a third party has a sufficiently common interest in legal advice, obtain a confidentiality undertaking before disclosing the document;
  6. mark privileged documents as ‘[insert company name] claims legal professional privilege over this advice and disclosure is not permitted to anyone outside of [insert company name] without legal advice’.

And a final note about common interest privilege – sharing the privilege brings with it a shared responsibility in maintaining it.  In other words, a party to a common interest privilege claim, can destroy the privilege for itself and all of the other parties to that claim.

[1] Note that the Evidence Act 1995 (NSW) recognises common interest privilege in section 122
[2] Network Ten Limited v Capital Television Holdings Ltd & Anor (1995) 36 NSWLR 275
[3] Rich v Harrington (2007) FCA 1987
[4] Rich v Harrington (2007) FCA 1987
[5] Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd (1988) 13 NSWLR 680 at 695
[6] State of South Australia v Peat Marwick Mitchell (1995) 65 SASR 72
[7] Thiess Contractors Pty Ltd v Terokell Pty Ltd [1993] 2 Qd R 341; Bulk Materials (Coal Handling) Services Pty Ltd v Coal and Allied Operations Pty Ltd (1988) 13 NSWLR 680 at 695
[8] Leis Hoegh & Co P/L v Petrolsea Inc (“The World Era”) (no 2) [1993] 1 Lloyd’s Rep 363

Alistair Little, Partner

Sarah Wheeler, Senior Associate

Newsletter 29 April 2010
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