knowledge 21 October 2022 |

Common interest privilege

In these proceedings,¹ the plaintiff trustee in bankruptcy sought to recover funds from the defendant. The trustee claimed that these funds formed part of a bankrupt’s personal property and should be recovered for the benefit of his creditors.

The defendant had already been a defendant in an earlier set of unsuccessful proceedings brought against him by the bankrupt and relating to the same funds. In the context of those earlier proceedings, the bankrupt had shared various privileged documents with his trustee in bankruptcy. The defendant now sought disclosure of those documents on the basis that the bankrupt had waived privilege when the documents were shared.

The trustee resisted this application saying that as he had a common interest with the bankrupt in the earlier proceedings, privilege had not been waived.

Common interest privilege

Twomey J said that the following principles on common interest privilege could be extracted from the case law:

• Common interest privilege is not a freestanding privilege but rather a way in which legal advice privilege/litigation privilege is not lost where there is limited disclosure to a party with a common interest.

• It follows, therefore, that when common interest privilege is claimed there are two steps to be undertaken:
  • First, one must ask whether the documents in the hands of the first party would have the benefit of privilege in the first place.
  • Secondly, where those documents have been released to a second party, one must ask whether the release was on foot of a common interest in the relevant litigation or advice.

• It is clear that factors in determining whether the disclosure to the second party will lead to a loss of privilege are whether there is an intention on the part of the first party to abandon privilege as well as considering the purpose and breadth of the disclosure and the relationship between the parties.

• It is possible for two parties to have a common interest, for the purposes of preserving common interest privilege, even where they are antagonistic towards each other.

Fracture of common interest

The defendant accepted that the documents were originally privileged and that there had been a prior common interest between the trustee and the bankrupt in the earlier proceedings as under a 2017 deed of settlement the trustee had an involvement and interest in their outcome.

However, some months after the delivery of judgment in those proceedings, the trustee had rescinded the deed of settlement. His written notice had purported to do this with retrospective effect, backdating the rescission to the date of judgment. He had then relied on this purported date of rescission in his pleadings in the current action.

The privileged documents had been shared after the judgment but before the retrospective notice of the rescission. The issue for the court was whether the common interest could be fractured retrospectively and whether the trustee was stuck with the date pleaded in the current action?

Decision of the court

Twomey J refused to order disclosure. He said that the key issue for the court was not the purported retrospective date of rescission that the trustee had pleaded in the current action. Whether it was possible for an agreement to be rescinded retrospectively was an entirely different question and did not need to be decided at this point.

Instead, the issue was whether a common interest had existed between the bankrupt and the trustee on the dates the documents were shared? He was satisfied that it had. This was because, viewed as things stood on that date, on what basis could it be said that the deed of settlement had been rescinded?

He was satisfied that parties could retain a common interest, even where they were antagonistic towards each other as the bankrupt and the trustee may have been at that stage. However, looking at the content of the relevant correspondence, it was also clear that the intention was to work in a consensual fashion through the consequences of the earlier judgment.

There was also no indication of any intention to abandon the privilege in the correspondence. This was particularly significant as certain of the documents, such as a legal opinion, related to the earlier litigation against the defendant which was not yet finalised. A very clear intention to waive privilege would be needed here.

For those reasons, the court concluded that the common interest which existed between the bankrupt and the trustee was fractured with the communication of the notice of recession but this did not operate to fracture that interest retrospectively.

Comment

As is clear from the judgment, common interest privilege is not a separate species of privilege. Rather, where a document is already covered by legal professional privilege and it is given to another party, common interest privilege may prevent the waiver of privilege in respect of that document if the parties have sufficiently close interests in the advice or litigation. In practice, parties may choose to enter into a common defence agreement to evidence the intention that the privilege should arise.