Fresh Direct Ltd v J M Batten and Associates HC Auckland CIV 2008-404-004757
[2009] NZHC 2430
•1 October 2009
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV 2008-404-004757
BETWEEN FRESH DIRECT LIMITED
Plaintiff
ANDJ M BATTEN AND ASSOCIATES First defendant
ANDRAYMOND KEITH BATTEN Second Defendant
Hearing: 29 July 2009
Appearances: L J Turner for the Plaintiff
M G Ring QC and E S Lawless for the First and Second Defendants
Judgment: 1 October 2009 at 4:00pm
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie
on 1 October 2009 at 4:00pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors/Counsel:
L J Turner, Southern Cross Chambers, P O Box 775, Shortland Street, Auckland 1140
Shieff Angland, P O Box 2180, Auckland 1140
M G Ring QC, P O Box 105 521, Auckland 1143
FRESH DIRECT LIMITED V J M BATTEN AND ASSOCIATES AND ANOR HC AK CIV 2008-404-004757
1 October 2009
[1] The defendants seek review of a decision made in chambers by Doogue AJ
on 8 April 2009. In his decision, Doogue AJ set aside various claims for privilege made by the defendants in respect of a number of discovered documents.
Background
[2] The plaintiff, Fresh Direct Limited (“Fresh Direct”) and its parent company are suing the first defendant – J M Batten and Associates (“Batten and Associates”) –
for loss said to have been suffered as a result of negligent advice.
[3] Batten and Associates is a firm of accountants, and the second defendant, Mr Batten, is a principal in the firm. Fresh Direct alleges it has suffered loss as a result of negligent accounting services that Batten and Associates and Mr Batten provided. It says that in August 1999, acting on advice received from Batten and Associates, it made various changes to its shareholding. It asserts that the effect of the changes was a loss of shareholder continuity and that, as a result, tax losses accumulated by it to 31 March 2000 were no longer available.
[4] Mr Batten first identified the potential problem in July 2005. On 20 July
2005 he contacted his insurance broker to notify them of the circumstances that had arisen. On 21 July 2005 he received notification documentation from his broker. The documentation comprised a “Notification of a Possible Professional Indemnity Claim” form. On 27 July 2005, he tabled a report in a meeting with Fresh Direct which outlined the problem. The report was not discussed at the time. On 29 July 2005 he completed the notification form and sent it to his broker. I note that the notification form is dated 23 July 2005. Nothing turns on the precise date.
[5] The broker in turn sent the notification form to the insurer – QBE Insurance (International) Ltd (“QBE”). QBE then sought advice from an entity known as NSA Limited. NSA Limited are tax and trust specialists and commercial advisers. Advice was given in writing by an employee of that company on 18 August 2005.
[6] On receipt, the advice from NSA Limited was considered and annotated by
an employee of QBE. The annotations are dated 22 August 2005.
[7] Fresh Direct made a profit in the 2005-2006 financial year and it wished to carry forward the accumulated losses to reduce its tax liability.
[8] In December 2006, Fresh Direct wrote to Batten and Associates. The letter noted that the inability to carry forward the tax losses was a major concern to Fresh Direct and that it had serious repercussions for the company. It requested suggestions as to what could be done to address the situation. Litigation was not referred to in the letter.
[9] Mr Batten responded on 12 December 2006. He advised that Batten and Associates had insurance but that it had not made a claim at the time. He suggested that voluntary disclosure should be made to the Inland Revenue Department and that the position could be reconsidered once a response from the Inland Revenue Department had been received. He offered to enlist the services of NSA Limited and to meet the costs involved in that exercise.
[10] On 2 April 2007, Fresh Direct wrote to Batten and Associates recording that
it had been advised to make a claim against the firm for any losses it might incur.
[11] A week later, QBE engaged solicitors to conduct Batten and Associates’
defence.
[12] Fresh Direct issued the current proceedings in July 2008.
Discovery – Privilege
[13] In the course of the proceedings, Batten and Associates filed an affidavit of documents. It was sworn on 1 October 2008. Privilege was claimed in respect of
various documents as follows:
Doc
No
Date Doc
Type
Description Category
3.1 5.4.07 –
15.9.08
C/O Correspondence between the PI
defendants, their insurers, insurance brokers and SA or any
of them
Doc
No
…
Date Doc
Type
Description Category
3.3 18.8.05 CL NSA to QBE P4
The documents in category PI consist of confidential communications between the defendants and their legal advisers either directly or through their respective agents, made to or by their legal advisers in their professional capacity with a view to obtaining or giving legal advice or assistance including documents prepared with a view to being used as a communication falling into this category although not in fact so used.
[“Legal professional privilege or Solicitor/client privilege”]
The documents in category P4 comprise communications and documents passing between the defendants’ legal advisers and third parties, made or prepared when litigation was reasonably apprehended or had commenced, for the dominant purpose of enabling the defendants’ legal advisers to conduct or advise regarding the litigation. [“Litigation privilege”]
[14] On 20 November 2008, Fresh Direct challenged the claim to privilege. It asserted that solicitor-client privilege could not be claimed in respect of documents which were communications between Batten and Associates, their insurance brokers and their insurers. It also asserted that litigation privilege could not be claimed in respect of the NSA Limited letter.
[15] On 1 December 2008, Abbott AJ directed Batten and Associates to file an amended affidavit of documents listing each of the documents referred to under the heading Doc. No. 3.1 individually, and detailing the nature of any claim for privilege for each document. In relation to Doc. No. 3.3, Abbott AJ expressed the preliminary view that it was difficult to see that the document was created for the predominant purpose of preparing for litigation, and he suggested that it would be useful if Batten and Associates reconsidered its position.
[16] On 18 December 2008, Batten and Associates filed a supplementary affidavit
of documents. It listed each of the documents previously listed collectively as
Doc. No. 3.1. Only one is relevant for present purposes. It is listed as document
3.1.75 and it is described as “Notification of possible P.I. claim with statement of facts attached.” Legal professional privilege, common interest privilege and litigation privilege were claimed in respect of this document. Legal professional privilege and common interest privilege were claimed in respect of Doc. No. 3.3 –
the NSA Limited letter dated 18 August 2005. The annotated version of the NSA Limited letter was not separately listed, but it was dealt with in Doogue AJ’s decision and the review extends to the decision made in respect of that document as well.
[17] The claim to common interest privilege was expressed as follows:
The documents in category P3 comprise material collected by or on behalf of the defendants for the use of their legal advisers in relation to litigation, including counsel’s briefs, research material, briefs of evidence, statements, drafts and other documents prepared or obtained by the defendants’ legal advisers after litigation was reasonably apprehended or had commenced for the dominant purpose of this litigation and to enable the legal advisers to conduct the litigation or give legal assistance regarding it.
The Associate Judge’s decision
[18] Doogue AJ reviewed the background. He noted that Batten and Associates had made reference in the course of the hearing to s 54 of the Evidence Act 2006.
He considered that this section was not of any particular relevance, because the documents in issue were communications by Batten and Associates with its insurer, rather than with its legal advisers.
[19] The Associate Judge therefore approached the matter by reference to s 56 of the Act. He considered that the issues in the case were:
a) whether the documents were made with the dominant purpose of preparing for a proceeding; and
b)whether Batten and Associates at the time of making the documents contemplated on reasonable grounds that it would become a party to proceedings.
[20] Doogue AJ considered that the first issue was essentially one of fact. He noted that s 56(1) is couched in the passive voice, and he expressed the opinion that it must be the person who seeks to invoke the privilege who must have the apprehended proceeding in mind. He expressed the view that any apprehension must
be held on reasonable grounds, and that purely subjective grounds would not suffice.
He also expressed the view that the relevant purpose is not just that of the person who originated the document, and that the purpose of the person who receives the information can also be relevant.
[21] Doogue AJ then considered each of the individual documents.
a) He considered that when Mr Batten completed the notification form on 29 July 2005, he had no reasonable grounds for apprehending that proceedings would be issued against him. He doubted whether QBE would have known anything about the background circumstances, and he concluded that QBE, because it agreed to receive the professional indemnity claim, could not be said to have known that it required such a document to enable it to prepare for litigation.
b)In regard to the NSA Limited letter dated 18 August 2005, he noted that QBE’s understanding of the factual position would have improved, because it would have considered the report that Mr Batten had enclosed with his notification form. He commented, however, that it did not receive the NSA Limited letter for the dominant purpose of preparing for the proceeding or apprehended proceeding. He concluded that a reasonable party in QBE’s position would not have apprehended that it was probable that proceedings would commence within the foreseeable future, that there were simply too many contingencies, and that it was at the time too early to have reached a judgment on that issue.
c) In relation to the copy of the NSA Limited letter annotated on
22 August 2005, Doogue AJ similarly concluded that QBE could not have bona fide believed at that point that litigation was probable.
[22] In summary, Doogue AJ concluded that none of the three documents were protected by privilege under s 56 of the Evidence Act 2006.
Submissions received
[23] Mr Ring QC appearing for Batten and Associates submitted that Doogue AJ
erred in focussing exclusively on s 56. He submitted that the Associate Judge failed
to appreciate the nature of the relationship between Batten and Associates and QBE.
He noted that s 54 applies to communication between a person and a legal adviser.
He submitted that the section does not require that the communication be directly between the person and his or her legal adviser, and that there is no requirement that
a document in respect of which privilege is claimed be designed for the immediate purpose of obtaining legal advice. He submitted that QBE was effectively a conduit,
or agent, for Batten and Associates, so that Batten and Associates could obtain legal advice on its potential liability and any remedial steps that could be taken. He submitted that the insurer and the insured had a common interest in determining whether there was liability, the extent of any liability and whether the same could be eliminated or minimised.
[24] Mr Ring then dealt specifically with legal professional privilege and common interest privilege. In relation to the notification form completed by Mr Batten, he submitted that that was a communication by Batten and Associates as the insured to QBE giving notice of circumstances as required by the policy, so that QBE could obtain legal advice on Batten and Associates’ potential liability. He submitted that there was common interest privilege in that communication under s 54. In relation to the letter from NSA Limited, he submitted that that was a communication by a legal adviser to QBE of legal advice obtained about Batten and Associates’ liability, and that it attracted legal professional privilege and/or common interest privilege under s 54. In regard to the annotated version of the NSA Limited letter, he submitted that that document also attracted common interest privilege under s 54.
[25] Mr Ring referred briefly to s 56. He submitted that on the facts as disclosed
in the affidavits, litigation was reasonably anticipated, that there was an apparent professional mistake, and that it was not necessary that there be a formal claim to trigger the operation of the section.
[26] Mr Turner for Fresh Direct submitted that s 54 could have no application. He noted that legal advice was not sought until April 2007 when a claim was made against Batten and Associates. He queried how it could be asserted that Batten and Associates was seeking legal advice when Mr Batten sent in the notification form some 20 months earlier.
[27] Mr Turner submitted that Doogue AJ had correctly applied s 56 of the Evidence Act. He asserted that the real issue before the Court was whether the documents were created for the dominant purpose of preparing for a reasonably apprehended proceeding. He submitted that the findings made by Doogue AJ in this regard were findings of fact. In his argument, none of the three documents compiled were prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding, and Doogue AJ’s findings were amply justified. Indeed he submitted that they were inevitable.
[28] Mr Turner emphasised that at the time the documents were created, there was
no claim or threat to sue. He pointed out that there was not even any communication from Fresh Direct about the issue at that stage. He submitted that Doogue AJ’s decision was correct in fact and law, and that litigation could not have been reasonable contemplation at the time the documents were produced.
Analysis
[29] To date this case has proceeded on the assumption that it is governed by the Evidence Act 2006. Doogue AJ relied on s 56 of the Act and both counsel before me proceeded on the premise that the Act applies. Mr Ring did refer briefly to the topic. He was content to rely on s 5(3) and his argument proceeded on the basis that the Evidence Act applied.
[30] In my view this assumption is wrong. The documentation in issue was created in July/August 2005. At the time the Evidence Act was not in force. It only came into force on 1 August 2007.
[31] It has been held that ss 51 and 54 of the Act do not apply retrospectively to communications made before the Act came into force – Todd Pohokura Limited v Shell Exploration NZ Limited (2008) 18 PRNZ 1026. While it has been suggested that this decision is controversial – see Cross on Evidence, New Zealand Edition, para EVA 51.1, p 3602, with respect to the authors of the text, I do not consider that that criticism is warranted. The decision is carefully reasoned. The reasoning is orthodox and consistent with the Interpretation Act 1999. It also produces what must have been an anticipated result as between the parties to that case. In my view Todd is correct. I note that the same view has very recently been taken in relation to s 57 – Jung and Shin v Templeton HC AK CIV 2007-404-5383, Heath J, 30 September 2009.
[32] Todd deals expressly with s 54. That section deals with privilege. Batten and Associates rely on that privilege in regard to each of the documents here in issue. They also rely on s 56 which deals with litigation privilege. I can see no reason either in principle or in logic why the conclusion reached by Dobson J in Todd and by Heath J in Jung and Shin should not apply to s 56 as well.
[33] Each of the privileges relied on in this case – solicitor/client privilege (now in
s 54), litigation privilege (now in s 56) and common interest privilege – were substantive legal rights which existed prior to the introduction of the Evidence Act. For the reasons articulated in Todd, the Act does not retrospectively affect those rights and in my judgment it is the pre-Evidence Act common law rules on privilege that apply in the present case.
[34] I now proceed to consider the pre-Evidence Act position in regard to each of the privileges claimed. I also refer briefly to the position under the Evidence Act in case my conclusion that the pre-2006 law applies is incorrect.
Legal professional privilege
[35] In both civil and criminal proceedings, confidential communications between
a client and his or her legal adviser, made for the purpose of obtaining or giving legal advice, were in general protected from disclosure without the client’s consent or
waiver – see Regina v Derby Magistrates’ Court ex parte B [1996] AC 487. And see generally, The Laws of New Zealand, Edition as at 17 November 2000, Evidence, para 141.
[36] If the privilege was to apply, the relationship of solicitor and client had to exist, and the communications had to be made to the legal adviser in their professional capacity – see Rosenberg v Jaine [1983] NZLR 1 at 8. There was no privilege for communications before the relationship of solicitor/client was created, or after it had ceased – see Police v Mills [1993] 2 NZLR 592 at 595. The privilege applied to communications to or from legal advisers who were barristers and solicitors, but not to those without legal professional qualifications – see R v Secord [1992] 3 NZLR 570 at 573.
[37] In my judgment, legal professional privilege is not available in the present case in respect of the notification form; nor is it available in respect of either the original or the annotated letter from NSA Limited.
[38] All of the communications in respect of which privilege is claimed were created in July/August 2005. The relationship of solicitor/client did not exist at that time. No legal advisers were appointed by Batten and Associates or QBE until April 2007, some 20 months after the documentation was created. Legal professional privilege cannot in the circumstances apply.
[39] Further, QBE was not a legal adviser. When Mr Batten sent the notification form to QBE in late July 2005, he was not seeking to obtain legal advice. Rather he was complying with the obligation contained in his firm’s insurance policy to advise
his insurer of circumstances that might give rise to a claim. When QBE sought advice from NSA Limited, it was not acting as a legal adviser to Batten and Associates. QBE was not in a position to offer legal advice. It was not legally able to do so under the then relevant provisions in the Law Practitioners Act 1982. Further QBE was not seeking to obtain legal advice from a legal adviser. It was seeking advice from a company which offered specialist tax advice. It wanted to know whether Batten and Associates was at risk of being found liable to Fresh Direct and what was the likely quantum of any liability. NSA Limited was the entity giving
the advice. It was not a legal adviser either and like QBE, it was not in a position to offer legal services. It matters not that the individual who signed the letter may have had legal qualifications and/or a practising certificate.
[40] The same conclusion is reached under s 54 of the Evidence Act. That section
re-states the position at common law. Relevantly it provides as follows:
(1) A person who obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was—
(a) intended to be confidential; and
(b) made in the course of and for the purpose of—
(i) the person obtaining professional legal services from the legal adviser; or
(ii) the legal adviser giving such services to the person.
[41] The privilege recognised in s 54 is open only to a person who obtains professional legal services from a legal adviser. The words “professional legal services” are not defined (although their meaning is extended to embrace advice given by patent attorneys and overseas practitioners). Clearly the services obtained have to be “legal services”. They must be “professional” legal services obtained from a “legal adviser”. The words “legal adviser” are defined in s 51 of the Act. They mean a lawyer, a registered patent attorney, or an overseas practitioner. The word “lawyer” has the meaning given to it by s 6 of the Lawyers and Conveyancers Act 2006. The word is defined in that Act as meaning a person who holds a current practising certificate as a barrister or as a barrister and solicitor.
[42] As noted, there was no solicitor/client relationship between Mr Batten and QBE or between QBE and NSA Limited. Mr Batten was not seeking to obtain professional legal services from QBE. QBE was not in a position to act as a legal adviser; nor was NSA Limited.
[43] Section 51(4) provides that a communication made or received by a person includes a reference to a communication made or received by an authorised representative of that person on that person’s behalf.
[44] There is nothing to suggest that QBE, or NSA Limited, were acting as authorised representatives of legal advisers or on their behalf. As noted, no legal advisers were appointed until April 2007.
Litigation privilege
[45] Litigation privilege at common law was allied to legal professional privilege. Litigation privilege provided protection against disclosure of communications between a person (or his or her legal adviser) and a third party, for the purpose of pending or contemplated adversarial litigation, which must have been definitely in prospect, and not a vague anticipation. To be privileged from discovery or production in evidence, the communication had to have been made with a dominant purpose of enabling the party (or legal adviser) to conduct or receive and give advice in the litigation – see Laurenson v Wellington City Corporation [1927] NZLR 510; Alfred Crompton Amusement Machines Ltd v Customs and Excise Commissioners (No. 2) [1972] 2 QB 102; Guardian Royal Exchange Assurance of New Zealand Ltdv Stuart [1985] 1 NZLR 596. And see generally, The Laws of New Zealand, Edition as at 17 November 2000, Evidence, para 142.
[46] Before litigation privilege could be claimed, the person claiming the privilege either must have been, or must reasonably have contemplated becoming, a party to a proceeding or an anticipated proceeding. Further, the communication in respect of which privilege was claimed must have been made, received, compiled or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding.
[47] In Guardian Royal Exchange, Cooke J proposed the following test to determine whether or not litigation privilege could be invoked:
… When litigation is not in prospect the traditional view is that communications between a party or his solicitor and a third party are not privileged, even although they may have been for the purpose of the giving or obtaining of legal advice …
… I would propose as the New Zealand rule that, when litigation is in progress or reasonably apprehended, a report or other document obtained by a party or his legal adviser should be privileged from inspection or
production in evidence if the dominant purpose of its preparation is to enable the legal adviser to conduct or advise regarding the litigation.
[48] Whether or not the dominant purpose for the preparation of the documentation was to enable the advisers to conduct or advise regarding litigation was a question of fact. Similarly whether litigation was reasonably apprehended was a question of fact. A mere vague apprehension of litigation was not sufficient. There had to be a bona fide belief that litigation would probably ensue – Laurenson. Litigation had to be more than a possibility – it had to be pending or contemplated – Guardian Exchange. The authorities are helpfully collected and analysed in the decision of Master Williams QC (as he then was) in Harrison v Attorney General (1989) 4 PRNZ 122.
[49] Here litigation privilege is claimed in respect of the notification form. In my view it cannot be claimed for that document.
[50] The notification form was completed so that Batten and Associates could comply with its contractual obligation to notify its insurers. The form was completed in late July 2005. At that time, there had been no intimation of a claim by Fresh Direct. It had then suffered no loss from the alleged negligence and it had not even corresponded with Batten and Associates about the issue. Fresh Direct did not raise any concerns until December 2006 – some 17 months later. Even then litigation was not threatened. Mr Batten’s response was to recommend that voluntary disclosure be made to the Inland Revenue Department, and to advise that once the Department’s response had been received, he would then be in a position to judge whether or not he should file a claim with his insurers. I agree with Doogue AJ that a conciliatory stance was initially taken by Fresh Direct and that Mr Batten clearly hoped that there would be a favourable outcome.
[51] There cannot, on the materials available, have been any reasonable bona fide belief that litigation was in prospect as at July 2005. There was at worst from Mr Batten’s perspective a possibility that litigation might result if Fresh Direct ultimately suffered a loss as a consequence of any negligence by him or his firm. That is insufficient to trigger litigation privilege.
[52] The position at common law in relation to litigation privilege is re-stated in
s 56. Relevantly the section provides as follows:
(1) Subsection (2) applies to a communication or information only if the communication or information is made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding (the “proceeding”).
(2) A person (the “party”) who is, or on reasonable grounds contemplates becoming, a party to the proceeding has a privilege in respect of—
(a) a communication between the party and any other person:
(b) a communication between the party's legal adviser and any other person:
(c) information compiled or prepared by the party or the party's legal adviser:
(d) information compiled or prepared at the request of the party, or the party's legal adviser, by any other person.
[53] Section 56 gives statutory imprimatur to the dominant purpose test discussed
by the Court of Appeal in Guardian Royal Exchange Assurance – see Carter Holt Harvey Ltd v Genesis Power Ltd (No. 7) HC AK CIV 2001-404-1974, 6 May 2008, Randerson J at [14].
[54] For the reasons already explained, in my judgment, litigation privilege is not available under s 56 in respect of the notification form. The form was not prepared
for the dominant purpose of preparing for the proceeding or an apprehended proceeding. At the time he prepared the form, Mr Batten could not, on reasonable grounds, have contemplated becoming a party to any proceedings.
[55] Doogue AJ went on to consider the position of QBE. He had observed at
[21] that the relevant purpose, pursuant to s 56(1), is not just that of the person from whom the document originated, and that the purpose of the person who received the information, can also be relevant.
[56] With respect, I do not agree with this observation. Section 56(1) details the type of communication or information in respect of which privilege can be claimed. Section 56(2) states that it is the person who is, or who on reasonable grounds
contemplates becoming, a party to the proceeding who has the relevant privilege. Here QBE is not, or was never likely to be a party to the proceedings brought by Fresh Direct. I conclude that it was not therefore necessary to address the position of QBE when considering whether or not privilege was available in respect of the notification.
[57] It follows that in my view privilege is not available to Batten and Associates under litigation privilege at common law or under s 56 in relation to any of the documents here in issue.
Common interest privilege
[58] Common interest privilege derives from an early decision of Kindersley VC
in Jenkyns v Bushby (1866) 2 LR Eq. 547. It came to more recent prominence in the United Kingdom in Buttes Gas And Another v Hammer And Another (No. 3) [1981] QB 223. It was there described by Lord Denning MR as being “a privilege in aid of anticipated litigation in which several persons have a common interest”. Brightman LJ at 267 noted that where two parties:
… exchange information for the dominant purpose of informing each other
of the facts, or the issues, or advice received, or of obtaining legal advice in respect of contemplated or pending litigation, the documents or copies containing that information are privileged from production in the hands of each.
[59] More recently, common interest privilege has been considered in a number of cases including Guinness Peat Properties Ltd v Fitzroy Robinson Partnership [1987]
1 WLR 1027 and in Winterthur Swiss Insurance Company, The National Insurance and Guarantee Corporation Limited v AG (Manchester) Limited (In liquidation) & Ors [2006] EWHC 839. Both were relied upon by Batten and Associates in the present case.
[60] Guinness Peat bears some factual similarity to the present case. In that case, defendants to an action had, as insureds, written a letter to their insurers about a claim threatened against them by the plaintiffs. They enclosed memoranda and expressed their own views as to the merits of the claim. The plaintiffs were
inadvertently given access to the letter. A dispute arose as to whether privilege could be maintained for it. In the Court of Appeal, Slade LJ held that the letter had been brought into existence at the instance of the insurers in order to obtain legal advice or assistance in the conduct of the litigation. He noted that although it was the insurers that had caused the letter to be written, it was the insured defendants who claimed that it was privileged. He held, following the statement of the law by Brightman LJ in Buttes Gas, that the document was privileged in the hands of the defendants.
[61] It is noteworthy that in Guinness Peat, proceedings had been threatened by the plaintiffs at the time the communication there in issue was created. That is not the situation in the present case.
[62] The availability of common interest privilege in New Zealand was considered
by Master Kennedy Grant in Unilateral Investments Ltd v VNZ Acquisitions Ltd
[1993] 1 NZLR 468. He held that common interest privilege was available, both where litigation was anticipated or pending, and (by reference to American authorities) where it was not. He further considered that the parties entitled to the privilege must have a common interest in the subject matter of the communications in respect of which the claim was made, and that that common interest must be identical, or if not identical, then closely related. The common interest could be either legal or commercial.
[63] Similarly in the United Kingdom the “aid in litigation” concept discussed in Buttes Gas has been extended to cover the situation where there is a sharing of legal advice with a third party who is not, and who is not likely to be, a party to the litigation to which the advice relates – Svenska Handelsbanken v Sun Alliance and London Insurance plc [1995] 2 Lloyd’s Rep 84
[64] Mr Ring submitted that:
a) the notification form was a communication by Batten and Associates
to QBE intended to give notice of circumstances which might lead to
a claim as required by the policy and to enable QBE to obtain legal advice on Batten and Associates’ potential liability;
b)Batten and Associates and QBE had a common interest in the subject matter of the notification form, and that their interest was identical. They also had the same interest in retaining the confidentiality of the form and common interest privilege applied;
c) the original letter from NSA Limited, and the annotated copy, were communications by NSA Limited as a legal adviser, to QBE as the insurer, of legal advice obtained about Batten and Associates’ legal liability. Again common interest privilege applied.
[65] With respect to Mr Ring’s arguments, in my judgment, none of the documents in issue in this case attract common interest privilege.
[66] It is not always clear on the authorities or in the texts whether common interest privilege is a separate stand alone privilege, or whether it is an extension to either legal professional privilege or litigation privilege or both. In my view it can not be a stand alone privilege. Rather it is an extension of either or both legal professional privilege or litigation privilege. Having a common interest in a document not otherwise privileged can not create an independent privilege. To suggest otherwise would be to negate in large part the rules applicable to legal professional privilege and to litigation privilege.
[67] The basis of common interest privilege was discussed in Network Ten Ltd v Capital Television Holdings Ltd (1995) 36 NSWLR 275 at 279. Giles J stated as follows:
If two parties with a common interest exchange information and advice relating to that interest, the documents or copy documents containing that information will be privileged from production in the hands of each; thus, if one of the parties obtains a letter of advice attracting legal professional privilege and provides it to the other, the other can also claim legal professional privilege.
I note that these observations were cited with approval by Master Venning (as he then was) in Hedley v Kiwi Co-operative Diaries Ltd [2000] 15 PRNZ 210.
[68] Common interest privilege is concerned with the effect of the confidential communication of a privileged document to a person who has a common interest in its subject matter or in litigation in connection with which the document was brought into being. The importance of common interest privilege lies in a client’s ability to voluntarily share privileged information with those with whom he shares a sufficient identity of interest in the subject matter of the information without there being a resultant waiver or loss of privilege – see C Passmore, Privilege, 2nd Edition, para 6035, p 295 et seq.
[69] Here, for the reasons I have explained, in my view legal professional privilege and litigation privilege are not available in respect of any of the documents
at issue in this case. Because none of the documents are privileged in the hands of either Batten and Associates or QBE, common interest privilege is not available when they get into the hands of the other.
[70] In any event, I doubt that there was a common interest at the time the notification form was created. Mr Batten was not communicating a privileged document to a person with a common interest in its subject matter. Rather, Mr Batten was responding to a contractual requirement in his insurance policy requiring him to disclose circumstances which could result in a claim. His interest was to comply with his policy to ensure that he did not lose such indemnity cover as was available to him. As he stated in his affidavit, he believed that when he lodged the notification form, QBE would take over the conduct of any claim. QBE’s interest was to receive notification of circumstances, so that it could assess whether the insurance policy applied and if so, make the appropriate provision for any claim. A common interest could exist only once QBE accepted that cover was available to Batten and Associates. The claim was then deemed to have been made in the policy year in which the circumstance was notified.
[71] Assuming for present purposes that QBE accepted that the policy responded
to the circumstances notified by Mr Batten (and that is not clear from the affidavits
filed), I accept Mr Ring’s submission that QBE and Batten and Associates then had a common interest in obtaining the views of NSA Limited. Their interests were not identical, but they were closely related. For the reasons I have already explained, in my view the letter received by QBE from NSA Limited is not protected by legal professional privilege. Common interest is not sufficient to create privilege in a document which was not otherwise privileged.
[72] It is not clear whether common interest privilege has been incorporated into the Evidence Act.
[73] I note s 56(2)(a). A person who is, or who on, reasonable grounds, contemplates becoming, a party to proceedings has a privilege in respect of a communication made, received, compiled or prepared for the dominant purpose of preparing for the proceeding or the apprehended proceeding, where inter alia that communication is between the person who is or who apprehends becoming a party to the proceedings, and any other person. This subsection would seem to embrace at least in part common interest privilege. It treats it as being part of litigation privilege. Section 56(2)(a) would not extend to confer privilege to the documents here in issue because at the time the notification form was created, there were no reasonable grounds on which Batten and Associates could reasonably have anticipated becoming a party to proceedings. Nor was the report from NSA Limited received by QBE (and Batten and Associates, assuming it received a copy of it) for the dominant purpose of preparing for apprehended proceedings. At that time, proceedings could not have been reasonably apprehended.
[74] It follows that in my view, common interest privilege is not available in respect of any of the communications in issue.
Result
[75] The application by Batten and Associates to review the decision of Doogue AJ is allowed to the extent noted in this decision. The Associate Judge’s conclusions are not however disturbed. I agree with the same, although for rather different reasons than were adopted by the Associate Judge.
Confidentiality
[76] Mr Turner, on behalf of Fresh Direct, sought that this judgment should not be released into the public domain, and that confidentiality orders should be made in respect of it. He was concerned to protect the confidential detail of his client’s trading history.
[77] I am not persuaded that it is appropriate to refrain from releasing this judgment into the public domain. I have, however, written the judgment in such a way as to ensure that little or no confidential financial information is contained in it. I cannot see that it is necessary to go further.
Costs
[78] Notwithstanding that the review has in part succeeded, in my view Fresh Direct is entitled to costs, together with its reasonable disbursements. Its arguments have largely succeeded albeit that they were advanced in a different context. It is my preliminary view that costs on a 2B basis are appropriate. If the parties are unable to reach agreement in relation to the same, I direct that:
a) Fresh Direct file and serve a memorandum seeking costs within 20
working days of the date of this judgment.
b) Batten and Associates file and serve a reply within a further 10
working days.
c) Fresh Direct file and serve any response within a further 5 working days.
I will then deal with costs on the papers unless I require the assistance of counsel.
Wylie J
4
2
0