preliminary issue - claim of common interest privilege
4 When the costs applications came on for hearing before me, counsel for Dr Patrick and Corrs sought, on instructions, to withdraw an affidavit sworn by Dr Patrick, and to object to the reading of an affidavit by Ms Goddard, a solicitor for Capital and Mr Park, on the basis of common interest privilege. It was said that this material was the subject of common interest privilege and could not, therefore, be used against either Dr Patrick or Corrs without the consent of both of them. I note that reliance is placed upon common interest privilege, as opposed to joint interest privilege. I also note that the material contained in the exhibits to Dr Patrick's affidavit was the subject of a Notice to Produce that was issued on behalf of Capital and Mr Park.
5 Dr Patrick's affidavit, which has numerous exhibits, was sworn subsequent to my judgement of 26 February 2004, on 4 July 2004, and filed and served shortly thereafter. At that stage, Corrs had ceased to act for Dr Patrick, on the grounds of conflict of interest, and the affidavit was prepared with the assistance of another Sydney firm of solicitors. Dr Patrick has since retained Minter Ellison, who began to act for him on 23 July 2004, and now jointly represent both Corrs and Dr Patrick. The affidavit of Ms Goddard was sworn on 29 June 2004. In it, Ms Goddard deposed to the result of investigation of the file and records of Corrs concerning this proceeding, in respect of which Dr Patrick had raised no objection of privilege.
6 Counsel for Corrs and Dr Patrick tendered a Deed of Settlement and Release between Dr Patrick and Corrs, of July 2004, which does not bear a specific date, but bears a facsimile transmission notation of 23 July 2004. The recitals to this deed relevantly state that:
"A. In or about October 2000 Patrick instructed Corrs to advise in relation to his 1996 investment of $100,000 in the stage production 'Crazy For You'.
B. In or about May 2001 Patrick further instructed Corrs to act on his behalf as the named applicant in proposed representative proceedings in the Federal Court ('the Crazy For You Proceeding'), and in relation to a debt and caveat claim against Patrick by the Overseas Chinese Banking Corporation ('the retainer').
C. The Crazy For You proceeding was issued on 6 June 2001 in the Victorian Registry of the Federal Court by proceeding numbered V637 of 2001, and judgment was delivered on 26 February 2004, in favour of the respondents.
D. The first six respondents to the Crazy For You Proceeding subsequently sought orders that both Patrick and/or Corrs pay those respondents' cost on, inter alia, an indemnity basis ('the respondents' costs application').
E. Patrick has advised Corrs that he supports the respondents in seeking orders that Corrs pay any costs ordered to be paid to the respondents ('Patrick's costs application'), and has made various claims regarding conduct of Corrs against Corrs ('the claim').
F. Corrs denies any liability in relation to the respondents' costs application, Patrick's costs application, or the claim." (Emphasis added)
7 It is important to note the conflict of interest between Corrs and Dr Patrick evidenced by recital C.
8 On 22 November 2002, two days after the hearing of the principal proceeding commenced, the solicitors for OCBC, Cornwall Stodart, wrote to Ms Kaitinis of Corrs, stating:
" … the Applicant's case against OCBC is in our view entirely without foundation. In particular, there is absolutely no basis for the fraud allegations made against OCBC. In our view it is now clear, if it was not already before, that there is no proper basis upon which counsel can sign the certificate required by Order 11 rule 1B of the Federal Court Rules in respect of the Fourth Further Amended statement of Clalm [sic] or your firm can permit this proceeding to continue.
If the allegations of fraud and dishonesty (objective or otherwise) against OCBC are not immediately withdrawn, OCBC will hold your firm and counsel retained by your firm accountable for the making and continuation of those allegations. Our client will also be looking to your firm and counsel retained by your firm for its costs of defending these allegations and of the proceedings generally, if Dr Patrick does not promptly satisfy the costs orders which will be made against him." (Emphasis added)
9 Shortly thereafter, on 9 December 2002, Counsel for Dr Patrick certified the Fourth Further Amended Statement of Claim.
10 This letter, in a general sense, was said by Corrs to give rise to common interest privilege with Dr Patrick on the part of Corrs, arising from the contingent threat to seek costs against Corrs if Dr Patrick did not pay. This of course assumes, from November 2002, that Dr Patrick would lose the case that was at issue in the principal proceeding. In my view, such a generalised contingent threat does not give rise to a sufficient common interest by Corrs in the outcome of the principal proceeding at that point. The position was different after March 2004, once judgment had been given for the respondents in the principal proceeding, and the respondents had clearly indicated that orders for costs would be pursued against Corrs on an indemnity basis.
11 However, this does not alter the important circumstance that at the time when Dr Patrick waived privilege by swearing his affidavit of 6 July 2004 and giving permission to Capital and Mr Park to access his file (which led to the affidavit of Ms Goddard), Dr Patrick did not have a common interest with Corrs in the outcome of the costs applications. Even if the threat contained in the letter of 2002 was sufficient to give rise to common interest privilege, the fact remains that when Dr Patrick waived privilege in 2004, his interests were clearly hostile to those of Corrs in relation to costs.
12 Briefly summarised, Counsel for Corrs and Dr Patrick submits that because his clients have a common interest in resisting the respondents' applications for costs, whether on an indemnity basis or a party-party basis, they share common interest privilege in the records that Corrs kept in relation to these proceedings, which cannot be waived by one party to the common interest without the consent of the other. Accordingly, it is said that the conduct by Dr Patrick that purported to waive privilege in these documents (filing an affidavit that evinced his intention to claim against Corrs and allowing access to his Corrs file) could not waive that privilege, since Corrs had not consented to any waiver. Therefore, it is said that these documents may not be used in these applications.
13 The common interest is said to derive both from the fact that Corrs and Dr Patrick had a common interest in defending any action for costs against them dating back to at least November 2002, when OCBC intimated that Corrs might be sued for costs along with Dr Patrick as a consequence of amendments to the Statement of Claim, and from the operation of the Deed of Settlement and Release made on or about 23 July 2004. It is said for Dr Patrick and Corrs that the privilege arising from this common interest extends to prevent the use in evidence of disclosures made by Dr Patrick, prior to entry into the Deed of Settlement and Release of July 2004, regarding his dealings with Corrs. The consequence would be that all the material in the Corrs file, together with the contents of Dr Patrick's affidavit of 4 July 2004 and that of Ms Goddard's affidavit of 29 June 2004, could not be relied on in relation the costs claims.
14 As the recitals to the Deed of Settlement and Release extracted above state, prior to 23 July 2004, Dr Patrick was supporting the respondents in seeking orders that Corrs pay any costs ordered to be paid to the respondents. He was also intending to make claims against Corrs regarding its conduct of the proceeding on his behalf, as evidenced by his affidavit of 4 July 2004, which was filed by his then independent solicitors, Milne Berry & Berger. It is important to note that Dr Patrick retained these solicitors after a communication from Corrs on 22 March 2004, which pointed out that the interests of Corrs and Dr Patrick could be in conflict in relation to the costs applications.
15 The respondents submit that until execution of the Deed of Settlement and Release, the interests of Dr Patrick and Corrs in the costs applications, far from being held in common, were diametrically opposed, and therefore could not form the basis of a common interest privilege that would prevent the respondents from using material which had lawfully come into their possession with the consent of Dr Patrick. They also contend that common interest privilege cannot retrospectively apply to the material waived by Dr Patrick prior to his entry into the Deed of Settlement and Release, in order to protect Corrs against claims by third parties, namely the respondents, to whom there has been disclosure, and who share no common interest with Corrs.
16 At the conclusion of the argument on the common interest privilege question, I decided to admit the material in question conditionally, and to proceed on the basis that that I would rule on the submissions and give my reasons for the ruling which I now set out below. There was no cross-examination on either Dr Patrick's affidavit of 4 July, or Ms Goddard's affidavit of 29 June.
17 Common interest privilege was described by Brightman LJ in Buttes Gas and Oil Co v Hammer (No. 3) [1981] 1 QB 223 at 267-8:
"… if two parties with a common interest and a common solicitor 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. … this proposition … is a legitimate extension of the principle that protects confidential communications between co-plaintiffs or co-defendants for the purpose of an action."
18 There is a detailed consideration of common interest privilege in the judgment of Sheller JA in Farrow Mortgage Services Pty Ltd v Webb (1996) 39 NSWLR 601 at 609:
"Common interest is not … a rigidly defined concept. A mere common interest in the outcome of litigation will be sufficient to enable any party with that interest to rely on it."
19 In the present case, it could be argued that once the respondents had clearly stated that they would sue both Corrs and Dr Patrick for costs, then Corrs and Dr Patrick had a common or shared interest in the outcome of the litigation in order to defend the claim for indemnity costs against each of them. However, at the time when Dr Patrick swore his affidavit and disclosed his dealings with Corrs to the respondents, there was a clear conflict of interest between Dr Patrick and Corrs. Indeed, as the recitals to the Deed of Settlement and Release demonstrate, Dr Patrick had taken steps to support the respondents' claim against Corrs. This conflict subsisted until around 23 July 2004, when the Deed of Settlement and Release was executed. By that date, Dr Patrick had made his disclosure. It was thereafter too late for Corrs or Dr Patrick to assert that Dr Patrick's privilege should not be treated as having been waived.
20 The authorities are to the effect that after a conflict of interest has clearly been identified common interest privilege will not apply. A leading authority on this aspect is Lee v South West Thames Regional Health Authority [1985] 1 WLR 845. In that case, a young boy had been injured while being transported between two hospitals, which were each the responsibility of a different statutory authority, by an ambulance that had been provided by a third health authority. The statutory authority for one of the hospitals requested a report from the ambulance crew, with a view to obtaining legal advice on that authority's liability. A memorandum was provided, and was disclosed on preliminary discovery. The health authority responsible for the ambulance crew claimed privilege. Donaldson MR gave the judgment of the two member court, which decided that the courts should recognise as privileged information that is exchanged between a party to litigation and third persons with a common interest and legal advisers in common relating to pending litigation. His Lordship, referring to Buttes case, said at 850:
"The facts were far removed from this appeal, but all the members of the court thought there was such a thing as 'common interest' privilege. Mr Utley, for Marlon's [the boy's] mother, not unnaturally retorts that if Hillingdon [the health authority that ran one of the hospitals] is still a likely defendant, then far from having a common interest with the South West Thames Authority [the health authority that ran the ambulance service], their interests are diametrically opposed and their defences are likely to be of the 'cut throat' variety. Buttes' case is also thus distinguishable.
… The principle is that a defendant or potential defendant shall be free to seek evidence without being obliged to disclose the result of his researches to his opponent. Hillingdon can certainly waive its rights and, were it to do so, the memorandum would clearly be disclosable by South West Thames. However, it has not done so."
21 I note that in the present case, Dr Patrick's disclosure was not to a party with a common interest but rather to a party with a hostile interest.
22 In Ampolex Ltd v Perpetual Trustee Co (Canberra) Ltd (1995) 37 NSWLR 405 Giles CJ said at 409-10:
"What is important is that … two persons interested in a particular question will not have a common interest for the purposes of common interest privilege if their individual interests in the question are selfish and potentially adverse to each other. In such a case there will not be the necessary identity of interest." (Emphasis added)
Sheller J cited this passage with approval in Farrow at 612. I agree that it correctly states the principle.
23 In the case of joint interest privilege, which arises from legal advice being given to joint clients, each must join in the waiver to waive the privilege: see Ampolex at 412-3 per Giles J and the cases there cited. This is to be contrasted with common interest privilege, where it will not always be necessary for all the interested parties to concur in the waiving of the privilege in order for the privilege to be waived. Fairness may require that waiver by one of the parties constitutes waiver by all. This is to be determined according to the circumstances in which the privileged communication took place and came to be exchanged and provided to others: see Farrow per Sheller JAat 619-620; Australian Competition and Consumer Commission v Australian Safeway Stores Pty Limited (1998) 81 FCR 526 at 564 per Goldberg J; Gray v Associated Book Publishers (Aust) Pty Limited [2002] FCA 1045; JD Heydon, Cross on evidence, 6th Australian ed. Butterworths, Sydney, 2000 at [25015]; and J Auburn, Legal professional privilege: law and theory, Hart, Oxford, 2000 at 131-132. As noted above, Dr Patrick and Corrs rely upon common interest privilege rather than joint privilege.
24 In my view, when Dr Patrick swore his affidavit on 4 July 2004 and agreed to make his Corrs file available to the respondents, he unconditionally waived his privilege in respect of this material. At that time, his interests were directly opposed to those of Corrs. He had elected to assist the respondents by providing material in order to enable them to succeed in their claim against Corrs. This was done in furtherance of his own interests in pursuing a claim against Corrs for damages or indemnity. In such circumstances, it is somewhat artificial to suggest that Dr Patrick took any co-operative steps with Corrs to seek advice or obtain material which could give rise to a common interest during the entire course of the preparation and hearing of the principal claim from its inception.
25 The earliest point at which a relevant common interest between Dr Patrick and Corrs could have arisen, was in March 2004, which was when the respondents first made their claim for costs against both of them, following the judgment. However, shortly after the claim for costs was made against Corrs, Dr Patrick's interests became adverse to those of Corrs by reason of his decision to provide evidence against Corrs' interests to protect his own position. Accordingly, Corrs was not and is not entitled to prevent him from waiving that privilege in favour of the respondents to inspect the file and read his affidavit. Entry into the Deed of Settlement and Release on or about 23 July 2004 operated to create a prospective common interest between Dr Patrick and Corrs in relation to the proceedings against them. However, nothing of significance for present purposes appears to have come into existence between that date and the present time. I do not think that the execution by Corrs and Dr Patrick of the Deed of Settlement around 23 July 2004 could operate retrospectively to confer privilege on Corrs so as to prevent or extinguish the waiver by Dr Patrick of his privilege in or about March 2004 at a time when he did not have such a common interest with Corrs. It would be odd to say the least if a party were able to retrospectively confer privilege over material, dating back several years, in respect of which privilege had previously been waived so as to negate the waiver. My conclusion, therefore, is that prior to the execution of the Deed of Settlement and Release, Corrs and Dr Patrick did not have a relevant common interest in the litigation. It follows that the material in question is not the subject of common interest privilege, and cannot be excluded from this proceeding on that basis.
26 In the course of submissions reference was made to s 122(2) of the Evidence Act 1995 (Cth) ("Evidence Act"), which provides that the Evidence Act does not prevent the leading of evidence given with the consent of the party concerned. In this case, prior to the Deed of Settlement and Release of July 2004, there was a knowing and voluntary disclosure by Dr Patrick, to the respondents, of the contents of the file that records his dealing with Corrs.
27 A further particular objection to the evidence of Ms Goddard was based on discretionary considerations said to arise from the fact that Minter Ellison, the solicitors for Corrs, were not informed of her intention to examine Dr Patrick's files before she went to the Sydney office to inspect them. In an affidavit of 27 July 2004, Mr Obst of Minter Ellison refers to Ms Goddard's failure to consult him in relation to her inspection of the file. It was submitted on the basis of Mr Obst's evidence that Corrs had a proprietary interest in many of the documents and that there has been an inspection by "subterfuge". I disagree. There was no objection by Dr Patrick in waiving his privilege. In my view, there is nothing in the circumstances pointed to by Counsel for Dr Patrick and Corrs in relation to the inspection, which persuades me that as a matter of discretion the material should not be adduced in this proceeding.
28 I now turn to consider the grounds on which indemnity costs are sought against Corrs and Dr Patrick.