In my last blog, I covered the iniquity exception to privilege as considered by Sir Andrew Smith in Accident Exchange Ltd & Anor v McLean & Ors  EWHC 23 (Comm). In addition, his judgment also considered some interesting common interest privilege issues.
The claimants (AE) provided replacement motor vehicles on credit terms to clients whose vehicles had been damaged in road accidents. Their hire charges were recovered from the other drivers (and their insurers) involved in the accident. Autofocus (AF) provided forensic services where a question arose about the hire recoverable by an accident claimant who had hired a replacement vehicle on credit terms. AF produced thousands of such reports before a decision emerged in 2009 in which it became apparent that an AF employee - a rates surveyor- who had prepared a court report, had falsely claimed to have based the evidence on information from car hire companies who had been contacted about their hire rates. This led AE to allege that in the years before AF went into liquidation in 2010, it was involved in the systemic and endemic fabrication and manipulation of evidence about rates and the research that it had conducted so as to deceive businesses such as AE.
AE brought conspiracy and deceit proceedings against two former AF directors and three firms of solicitors who acted for defendant drivers facing claims by AE's clients to recover the hire charges for replacement vehicles.
Two of the defendant firms of solicitors sought disclosure and inspection of documents in the files of the solicitors who were instructed to bring claims (the "underlying claims") in the names of AE's clients to recover credit hire charges from defendant drivers. The defendant solicitors contended that under the arrangements between AE, its clients and the clients' solicitors, AE had a right of access to the solicitors' files, and also the right to use the material for its own commercial purposes, including the right to disclose documents and permit inspection of them, including in the present proceedings.
AE’s clients' solicitors took the view that they should not release their files without the clients' consent or a Court order; and while AE did not oppose the applications on its own behalf, it also considered that it should not itself disclose the documents unless its clients consented to it doing so and waived privilege in them. It wrote to them seeking their consent and waiver, but in the vast majority of cases there was no response to AE's letters. In these circumstances AE, while neutral on the applications, thought it right to advance arguments that might be available to a client who opposed the orders sought.
As for the arrangements between AE and its clients, the underlying rental agreements broadly speaking entitled AE to appoint a solicitor, granted AE an exclusive right to pursue a claim and obliged a client to provide "all of the co-operation and assistance which is reasonably necessary for the pursuit of the Claim". AE’s evidence was that solicitors were retained by AE's clients, and AE never retained them either alone or jointly with its clients.
Although Sir Andrew Smith agreed that the applicant solicitors were entitled to rely on the fact that AE considered itself in a position to direct how the claims of its clients should be pursued, it was clear that there was no joint retainer by AE and their clients of the solicitors handling the accident claims: accordingly, these were not cases involving a joint privilege. However, this was a case concerned with common interest privilege, since AE and its clients would clearly have a common interest in litigation against the defendant drivers, the Judge noting that the concept had become less restrictive as regards the interests that will attract CIP than when it was first recognised. However, he held that, at least in the circumstances of this case, the privilege could not be waived by one of the privilege holders alone and nor could AE be regarded as the primary privilege holder or that (therefore or otherwise) it had the power or authority to waive the common interest privilege for the benefit of the applicant solicitors.
What were the arguments that resulted in these rulings? The applicant solicitors' starting contention was based on provisions in the underlying agreements whereby the client authorised the solicitor to provide AE "with all the information about the Claim (including copies of all relevant documents)" that it reasonably required (clause 4.21). Since AE's right to require copies of documents was unqualified, AE had the right to require them for the purposes of this litigation. But the Judge did not accept the further contention, founded on Brown v Guardian Royal Exchange Assurance plc,  2 Lloyd's Law Rep 325 and Winterthur Swiss Insurance Co v AG (Manchester) Ltd (in liquidation)  EWHC 839 (Comm), that there was no proper basis on which privileged documents should be excluded from the ambit of the authorisation, such that AE was entitled to require that they be produced for inspection in the present proceedings: those authorities did not assist, since they were concerned with the interpretation of provisions in insurance policies and whether the insured was entitled under the terms of the policies to assert privilege against disclosing documents to the insurers when a dispute had arisen between them. It was implicit in the insurers' contractual rights that in conducting disputes with the insureds they might deploy the documents to which they were entitled, whether they were privileged or not.
Since the present case was about the interpretation of the rental agreements, two distinct questions arose: (i) whether AE was entitled to require copies of the documents (so as to have them in its "control" within the meaning of CPR 31.8), and (ii) whether, if so, the clients would have privilege in the copies so that AE could and should properly withhold them from inspection. As to the first point, Sir Andrew Smith held that the provision about the client providing information was directed primarily to entitling AE to information that it required to make decisions about how to conduct the claims against defendant drivers. While this did not mean that AE was entitled to information only for that purpose, or only if it is reasonably required for that purpose, it was:
“ … a separate question whether, in authorising the solicitor to provide to AE privileged information and copy documents, the client is to be understood to be waiving privilege only [as against] AE … or whether (s)he is to be taken to be waiving privilege altogether in any information and documents provided to AE so that AE is entitled to provide them to third parties, in this case to the applicant solicitors. Clause 4.21 does not expressly provide for this wider waiver, and I see no reason that it should be taken to do so by implication: of course, AE might need to deploy the information or documents in pursuing the claim against the defendant driver, but it can invoke its rights under clause 4.22 to require cooperation and assistance in that regard. But clause 4.22 is only about what is reasonably necessary for the pursuit of the claim against the defendant driver: it does not assist the applicant solicitors. So interpreted, while I accept that the documents that the applicant solicitors seek are within AE's control, I am not persuaded that clause 4.21 entitles them to permit inspection of them."
The solicitors' secondary argument was that, since AE and its clients had a common interest privilege in the documents, AE could effectively waive it alone and without the client doing so. No English judicial authority was cited that supported the proposition that common interest privilege can be waived by one privilege holder acting alone. The Judge was referred to an Australian authority to the effect that one privilege holder can effectively waive common interest privilege if "fairness" so requires: Farrow Mortgage Services Pty Ltd v Webb, (1996) 39 NSWLR 601, 619-620, where Sheller JA had said, "In cases of common interest privilege, as distinct from joint privilege, I do not think it will always be necessary that all interested parties concur for the privilege to be waived. If in principle legal professional privilege vested in a party is not lost by dissemination of the contents of confidential documents to others with a common interest, I think that fairness, in many cases, will require that the privilege not be lost because one of the parties, be it the provider or the recipient, is minded to waive it. Once parties with a common interest have exchanged or provided one to another the contents of communications with legal advisers about the subject of their common interest, the question of whether the privilege is lost with its waiver must be determined by asking whether the waiver has made it unfair for the other parties with a common interest to maintain the privilege".
Noting Hollander on Documentary Evidence (12th Ed, 2015), which posits a case where A shows his counsel's opinion to B in circumstances where there is common interest privilege, and opines that the only party that can waive privilege is A and that it is not B's privilege to waive, the Judge observed:
“It seems probable that that would generally be so, but the reason is, I would suppose, that the understanding between A and B in such circumstances would generally be that, by allowing B to see the opinion, A had no intention to fetter his right to choose how to deploy the opinion, whether or not that involved abandoning the protection of privilege. Hollander does, in any case, go on to acknowledge that in other situations it seems wrong that one holder of common interest privilege should be able to compromise the protection of both.”
He also noted Thanki, The Law of Privilege which concludes "the rights of the primary privilege holder ought ordinarily to be paramount", that is to say where a person who has privilege in a document shares it with another, it would ordinarily be an undue fetter on the original privilege holder to require the consent of the recipient to give an effective waiver. (Although not referred to in his judgment, that is what the Singapore High Court decided in Motorola Solutions Credit Co LLC -v- Kemal Uzan & Ors  SGHC 228.)
In Accident Exchange, the Judge held:
"… there is no good reason to distinguish the prima facie position in the two cases, or that, subject to any arrangement between the privilege holders, one party sharing common interest privilege should deprive the other(s) of the protection of privilege. I do acknowledge, however, that in cases of common interest privilege a proper inference might more readily be drawn that the parties' arrangements were such that one privilege holder might waive the protection. However, in this case the arrangements between AE and its clients were set out in the agreements that they entered into, and in particular the rental agreements set out what rights AE had in and with regard to the documents. I have concluded that the agreements do not provide for AE to waive privilege in the documents, and in my judgment the law will not supplement AE's rights along the lines of [the solicitors’] secondary argument. As in Brown, the relationship between AE and its clients with regard to rights in the solicitors' documents is defined contractually rather than by any general rule of law. Therefore, even if, contrary to my own view, … the law allows one privilege holder to waive common interest privilege, I cannot accept that AE can do so in this case. If it be a question of what the court considers "fair", I see nothing unfair in the clients maintaining privilege in the documents given their contractual relations with AE and the retainer letters. If, on the other hand, the primary or original privilege holder is in a position to give an effective waiver, I cannot conceive in what sense AE might be said to have some sort of priority or primacy over its clients with regard to documents in the solicitors' file or the protection afforded to them by legal professional privilege, so as to entitle it alone to decide whether or not to maintain privilege in them”.
What do we get from these rulings? First, where one party has a contractual right to use another’s privileged documents, that use may be limited to their use in disputes between them, and not in a dispute with a third party - but this will depend of course on the precise terms governing that right of access.
Secondly, even where one party has access to another’s privileged documents in consequence of a sharing arrangement governed by common interest privilege, the sharing party does not necessarily have the right to waive its original privilege over the shared documents without the consent of the party with whom shared: all will depend on the facts and circumstances. In which case, as I have always advocated, far better to bypass common interest privilege and have an agreement that sets out the terms on which privileged information is shared.
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