Common interest privilege arises where two or more people share a common interest in an underlying subject matter. It can be used as a shield and enable people with a common interest to share privileged documents without waiving privilege as against a third party. However, it can equally be used as a sword when the parties sharing a common interest fall out; it means one of them with privilege in a document cannot withhold it from the other.
English law relating to the scope of common interest privilege is still developing, but a number of decisions show how the principle works. The courts recognise that an insured and his liability insurer have sufficient common interest in relation to claims against the insured for the purpose of common interest privilege (Guinness Peat Properties v Fitzroy Robinson Partnership (1987)). The courts also held in Winterthur Swiss Insurance Company v AG (Manchester) Ltd (2006) that the relationship between NIG, an underwriter of After The Event ("ATE") legal expenses insurance, and the ATE claimants created a sufficient community of interest (as the insurer was subrogated to the rights of the insured and the insured also had contractual duties to co-operate with the insurer) to enable NIG to gain access to documents held by the ATE claimants which would otherwise be subject to the claimants’ privilege.
In Svenska Handelsbanken v Sun Alliance & London Insurance Plc (1995) it was held that "a very close community of interest" existed between an insurer and its reinsurers; therefore, legal advice regarding the merits of Sun Alliance’s dispute against its insured which Sun Alliance had passed to its facultative reinsurers could not be obtained on disclosure by its insured.
Common interest privilege will not, however, arise if the parties’ interests are potentially adverse. For instance, it was decided in Commercial Union v Mander (1996) that reinsurers who had purported to avoid the reinsurance contract, destroyed the basis of any common interest with the reinsured, and could not therefore obtain disclosure of the reinsured’s privileged documents. The judge noted that the reinsured obtained the documents in question before reinsurers sought to avoid the contracts but this did not change things since the effect of the avoidance was to return the parties to the same position as if no contract had ever existed.
Some authority, notably CIA Barca v Wimpey (1980), suggests that where the parties sharing a common interest fall out, the applicable time for testing the common interest is when the documents were brought into existence. Therefore, if one of them asserts the right to avoid the contract, that does not destroy the common interest in documents already in existence but the common interest will no longer exist from the date avoidance is asserted (or, possibly, is capable of being asserted).
Common interest privilege does not necessarily cease when the parties’ relationship is not completely harmonious. In one instance, The World Era (1992), the court held that a common interest between Marc Rich and Petrolsea in conducting an arbitration against ship owners did not end simply because they had fallen out over who should have conduct of the proceedings.
Where disputes involving insurers and reinsurers are concerned there is always the potential for issues of common interest privilege to arise, making it essential that the limits and scope of the privilege are fully recognised.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.