In Mornington, the Claimants sought a declaration that an audit report commissioned by the Defendant during without prejudice (WP) negotiations was not subject to WP privilege. The Defendant independently commissioned the relevant report and the Claimants agreed that they were prepared to receive the report (before proceedings had commenced) in the course of WP negotiations and reserved their right to challenge the assertion to privilege which they did when the Defendant asserted it at the disclosure stage.

The Court found that the report was not subject to WP privilege. It did not fall within the public policy rationale for WP privilege (ie. that parties should not be concerned that anything said in negotiations could prejudice them later, in order to encourage settlement) because it was not a statement or offer made in the course of negotiations, it was not a record of negotiations between the parties and it had nothing to do with admissions. The rule did not extend to cover anything the parties did to further discussions at a WP meeting. Nor was the report covered by WP privilege by agreement. While the scope of the rule could be extended by express or implied agreement, no such agreement was found in this case – there was simply no proposal which was accepted that the report would be WP.

In Moir, the Defendants filed an affidavit that had raised a number of issues with respect to their previous lawyers, including that their former counsel did not represent them in a timely and competent manner. Such evidence was filed in support of application for an extension of time. The Claimants argued that they had a right to test such evidence and that the Defendants had waived their legal professional privilege. Reliance was placed on a Bermudan authority – Thyssen-Bornemisza v Thyssen-Bornemisza [1998] Bda LR 11  – which stated that a party who puts a privileged relationship in issue is taken to have waived any privilege that could arise from such a relationship.

Mussden CJ agreed with the Claimants, quoting the reasoning from Thyssen: “a party who puts a confidential or privileged relationship in issue is taken to have waived any privilege that he might have arising from that relationship. I do not think that this is based upon some vague notion of fairness… It is rather an example of the Court protecting its own process, by declining to adjudicate an issue directly concerning a party’s relationship with his lawyer, without a frank disclosure of all that passed between them on the matter… The waiver arises from the invitation to the Court, by the party possessing the right to enforce confidentiality, to adjudicate on the matters to which the privilege relates.”

1. the Defendants had raised issues about their relationship with their lawyers;
2. it would not be fair to allow the Defendants to rely on such statements without the Claimants having the opportunity to test such evidence; and
3. the Defendants chose to rely on such evidence.

Both decisions evidence that a party must carefully consider before taking steps that may not be protected by privilege including (1) creating documents which are not privileged; and (2) running arguments which waive privilege. In Mornington, the Defendant could not rely on WP privilege to prevent disclosure of a report that it independently procured purely because it was commissioned whilst WP negotiations were taking place and in Moir, the Defendant could not put forward arguments in support of its application and prevent the Claimant from interrogating the evidence in support of those arguments on the basis of privilege.

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