Common interest privilege between insurers and insureds and the Asahi case

Introduction

The recent Federal Court decision of Justice Bromberg in Asahi Holdings (Australia) Pty Limited v Pacific Equity Partners Pty Limited (No 12) [2014] FCA 481 seems to have caused some consternation in the market around the maintenance of legal professional privilege in material exchanged between insureds and insurers. The decision however has less to do with maintaining privilege in circumstances where parties have a common interest and more to do with the means by which privilege can be maintained in circumstances where there is no common interest between the parties.

It is timely to review the established authorities on common interest privilege issues and instructive to view the Asahi decision in the context of these authorities and those dealing with the maintenance of privilege in the absence of a common interest

Common interest privilege – a refresher

At common law, a person who would be otherwise entitled to the benefit of legal professional privilege may waive the privilege. If a privileged document is given to a third party so that its contents cease to be confidential, the privilege in it is usually lost and will be regarded as waived. It is the inconsistency between the act of giving or disclosure with any continuing intention to maintain confidentiality which effects a waiver: Mann v Carnell [1999] 201 CLR 1.

There is an exception, however, where the person entitled to the privilege and the person to whom the document is disclosed have such a commonality of interest in relation to the subject matter of the privilege that the sharing of the document is consistent, rather than inconsistent, with a continuing intention to preserve confidentiality and privilege: Marshall v Prescott [2013] NSWCA 152.

In the Marshall case a passage by Lord Denning MR in Buttes Gas & Oil Co v Hammer (No 3) [1981] QB 223 at 243 on common interest privilege was cited with approval as follows:

"There is a privilege which may be called a "common interest" privilege. That is a privilege in aid of anticipated litigation in which several persons have a common interest. It often happens in litigation that a plaintiff or defendant has other persons standing alongside him — who have the self-same interest as he — and who have consulted lawyers on the self-same points as he — but these others have not been made parties to the action. Maybe for economy or for simplicity or what you will. All exchange counsels' opinions. All collect information for the...