Court dismisses privilege claim over HomeBond correspondence as dominant purpose was defect investigation, not litigation preparation.

Neutral Citation Number: [2009] IEHC 90

THE HIGH COURT

COMMERCIAL

2007 4691 P

BETWEEN

HANSFIELD DEVELOPMENTS, VIKING CONSTRUCTION, MENOLLY PROPERTIES AND MENOLLY HOMES

PLAINTIFFS

AND

IRISH ASPHALT LTD., LAGAN HOLDINGS LTD., LAGAN CONSTRUCTION LTD., AND LAGAN CEMENT GROUP LTD. (FORMERLY

LAGAN HOLDINGS LTD.)

DEFENDANTS

JUDGMENT of Mr. Justice Brian McGovern delivered on the 17th day of February, 2009

1. This an application on behalf of the first named defendant for an order pursuant to Order 31, rule 18 of the Rules of the

Superior Courts, requiring the plaintiffs to make available for inspection certain documents over which they have claimed

privilege. In the alternative, the first named defendant asks the court to inspect the documents in question for the

purpose of deciding as to the validity of the claim to privilege as provided for by Order 31, rule 20(2) of the Rules of the

Superior Courts.

2. These proceedings arise out of the building of three housing estates in North Dublin commencing in 2002. The houses

on the estates were built by the plaintiffs and between the three locations, 681 houses were built. The defendants are

sued as the providers of infill or quarry material which was compacted below the concrete floor slabs of the houses in

question. It is alleged that the quarry material was defective in that it contained a high level of pyrite which caused the

expansion of the infill, causing cracking to the floor slabs and other problems with the houses.

3. The plaintiffs are registered with HomeBond. The documents of which inspection is sought comprise correspondence

and written communications which have passed between the plaintiffs and the National House Building Guarantee

Company Ltd. (“HomeBond”). HomeBond was set up by the Government to provide structural defect cover for new homes

built in Ireland since 1978. Builders are entitled to register as members and purchasers who buy a home where it has been

registered under the scheme, obtain certain rights under the terms and conditions of the HomeBond agreement. Under the

terms of the agreement, the members warrant to the purchasers and HomeBond that they will attend to any major

defects in a dwelling built by them, either by remedying the major defects or, with the agreement of HomeBond, paying

the cost of the remedial works to the purchaser. If the member fails to remedy defects, HomeBond can do so and pursue

the member/builder.

4. I have set out, in broad terms, the structure of the HomeBond scheme as it is of some relevance to the matter I have

to determine. In this motion, the only privilege being claimed by the plaintiffs is litigation privilege. The issue of legal

advice privilege does not arise. Since the motion was issued, the plaintiffs have agreed to waive privilege in respect of 84

of 316 documents created by HomeBond and 32 of 209 documents received by HomeBond.

5. Mr. McDonald S.C. for the respondents to the motion accepts that the onus is on the party claiming privilege to prove

that privilege exists. He also accepts that as this is a case in which litigation privilege is claimed, the court must be

satisfied that the dominant purpose of the document which has been generated is litigation and not some other purpose.

There is, in fact, a significant measure of agreement between counsel on both sides in the motion. The defendants

maintain that the claim for privilege is ill founded. HomeBond are not a party to this action and the first named defendant

asks how litigation privilege can be claimed over documents authorised by HomeBond and, furthermore, how privilege can

attach to documents sent by any of the plaintiffs to a third party, namely, HomeBond. The plaintiffs argue that the

applicants in the motion ignore the common interest that exists between those parties. They say that the court should

consider not only these proceedings, but also any other actual or apprehended proceedings from homeowners at the time

when the documents were generated.

6. The respondents/plaintiffs say that there is evidence before the court that the communications between them and

HomeBond were confidential in nature and that this has been deposed to on affidavit. The applicants say that HomeBond

never maintained that the documents were privileged. Furthermore, they say that the plaintiffs and HomeBond do not

have a common interest in that HomeBond is not in the position of an insurer. They refer to the tripartite nature of the

HomeBond scheme.

7. Mr. O’Callaghan S.C. for the applicants states that HomeBond and the plaintiffs may obtain a benefit if his clients lose

these proceedings because then neither HomeBond nor the builders may be under any liability. But this does not give rise

to a “common interest” as understood in the authorities which have been opened to the court.

The law

8. To establish litigation privilege, there must be a confidential communication between a client and lawyer, or lawyer or

agent or between one of these and a third party, made for the dominant purpose of use in litigation. In Waugh v. British

Railways Board [1980] A.C. 521, the House of Lords adopted the “dominant purpose” test set out by Barwick C.J. in his

minority judgment in the High Court of Australia in Grant v. Downes [1976] 135 CLR 674, 677:

“A document which was produced or brought into existence either with the dominant purpose of its author, or the

person or authority under whose direction, whether particular or general, it was produced or brought into

existence, of using it or its contents in order to obtain legal advice or to conduct or aid in the conduct of litigation,

at the time of its production in reasonable prospect, should be privileged and excluded from inspection.”

In Waugh v. British Railways Board at p. 543, Edmund Davies L.J. stated at p. 543, that when assessing privilege, a court,

“. . . should start from the basis that the public interest is, on balance, best served by rigidly confining within

narrow limits the cases where material relevant to litigation may be lawfully withheld. Justice is better served by

candour than suppression.”

In the same case, Lord Wilberforce stated at p. 532:

“On principle, I would think that the purpose of preparing for litigation ought to be either the sole purpose or at

least the dominant purpose of it: to carry the protection further into cases where that purpose was secondary or

equal with another purpose would seem to be excessive and unnecessary in the interests of encouraging truthful

revelation.”

9. In Silver Hill Duckling Ltd. v. Steele [1987] I.R. 298, O’Hanlon J. adopted the view expressed by the House of Lords in

Waugh v. British Railways Board that the dominant purpose for the document coming into existence in the first place

should have been the purpose of preparing for litigation then apprehended or threatened. At p. 292, he said:

“Having considered the relevant authorities, I am of opinion that once litigation is apprehended or threatened, a

party to such litigation is entitled to prepare his case, whether by means of communications passing between him

and his legal advisers, or by means of communications passing between him and third parties, and to do so under

the cloak of privilege.”

10. The respondents to this motion argue that there is a real relationship between HomeBond and its members which is of

great significance to the members/builders because they are in a position to provide a warranty - a HomeBond warranty -

and will step into the builder’s shoes in the event that the builder is not in a position to remedy a structural defect in a

house. Counsel for the respondents argue that there is, therefore, a common interest privilege which arises out of the

creation of these documents. The court was referred to Buttes Gas and Oil v. Hammer (No. 3) [1981] QB 223, where

Brightman L.J. said at p. 267:

“. . . 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.”

The court was referred to extracts from ‘Disclosure’ by Matthews and Malek (2007 Edition) where the author addresses

the issue of litigation privilege and “communications between persons with a ‘common interest’”. At paragraph 11.60, the

author states:

“Where joint privilege exists, it is normally unnecessary to rely on common interest privilege. But common interest

privilege is different, both formally and in substance. And the rules on waiver are different. It does not matter

whether both parties are in the same litigation, or only one is, or whether they are both plaintiff or both

defendants, as long as they have a genuine common interest. Nor is it necessary for them to be represented by

the same solicitor as long as their interests are close enough to be able to do so. And although they must have a

common interest, i.e. an area of interest which is common to both, they need not have exactly the same

interests. The insurers of a party in litigation will usually have a ‘common interest’ with that party sufficient to

attract the privilege, as will reinsurers of insurers, at least so long as the contract of reinsurance is not avoided.”

11. In Moorview Developments Ltd. & Ors. v. First Active plc. & Ors. [2008] 1 IEHC 274, Clarke J. at paragraph 6.13 of

his judgment dealt with the issue of common interest privilege. He said:

“It is clear to me that common interest privilege arises in relation to documentation or materials which would be

the subject of either legal professional privilege or litigation privilege in the hands of one person or body, but where

the relevant materials are given to a third party who may be said to have a common interest in either the legal

advice or the litigation concerned. See, for example, Svenska Handelsbanken v. Sun Alliance and London Insurance

plc. [1995] 2 L.R. 284. Two questions therefore arise. The first is as to whether the documents would, in the

hands of a single party, have the benefit of privilege in the first place. If not, then no question of common interest

privilege could arise. If, however, the materials pass that first test but have been released by one party to a

second party, then it follows that it is also necessary to ask whether the release was on foot of a common

interest in either the relevant litigation or advice. If so, then the documents will remain privileged, notwithstanding

their release, by virtue of the doctrine of common interest. If not, then the release may be taken to be a waver

of any privilege which would otherwise have attached to the documents concerned. I should note that documents

passing to other companies within a group or connected companies where those companies have an interest in

the advice or litigation concerned are also covered, as would documents informing such connected entities of such

advice or the progress of such litigation.”

12. While it may be “putting the cart before the horse” in determining whether or not the plaintiffs and HomeBond have a

common interest, it seems to me that they do not.

13. I now consider whether the documents themselves are privileged. Having read the documents, it seems to me that

they are substantially concerned with how the pyrite issue should be addressed and investigated. Undoubtedly, they deal

with issues such as how to address defects in houses arising out of this problem, but the communications are not specific

to any litigation although they could be said to be of relevance to apprehended claims.

14. In the Silver Hill Duckling Ltd. case, Waugh v. the British Railways Board was approved in this jurisdiction and this

seems to represent the law here. The test I have to apply is whether the communications at issue in this motion were

prepared for the sole purpose, or with the dominant purpose, of preparing for litigation. In the Waugh case, Lord

Wilberforce expressed the view that it would be an excessive and unnecessary development to carry privilege protection

further into cases where that purpose was secondary or equal with another purpose. I agree with that view. Having read

the documents in this application, I am not satisfied that they were created with the dominant purpose of preparing for

litigation, but that this purpose (if it existed) was secondary or equal to another purpose, for example, the working out

between HomeBond and the plaintiffs as to how they should address and investigate the issue of pyrite involvement in the

housing defects generally.

15. For that reason, I hold - with the exception of one document to which I will refer - that the plaintiffs are not entitled

to claim privilege over the communications that are at issue in this motion.

16. The one document in respect of which I am prepared to allow a claim of privilege is document P21360/1. This was a

letter of 27th August, 2007, and is stated to be “strictly without prejudice”. The letter does not concern the pyrite issue

but does refer to a settlement of a dispute, the terms of which are confidential between the parties.

17. I will hear counsel on the form the order should take.