In McCulloch & Ors v Quinn & Ors [2012] NZHC 1850, the High Court has provided further guidance as to the scope of "without prejudice" privilege.

The plaintiffs in that case had sought discovery of documents relating to the settlement of related proceedings, namely a derivative action by shareholders under the Companies Act 1993. The plaintiffs claimed that – as the settlement had not been approved by the Court, as required under section 168 of the Act – the Court was entitled to be provided with every document that might bear upon the exercise of its discretion under that section, regardless of whether they would otherwise be subject to without prejudice privilege.

Allan J rejected this argument, noting that great care was needed in expanding the class of exceptions to without prejudice privilege and that the present case fell short of the recognised exceptions for fraud and dishonesty. He noted also that as the settlement agreement itself was before the Court, the documents in dispute were not essential to the running of the plaintiffs' case. Moreover, the wider consequences of granting the application also had to be considered. Accepting the defendants' argument would open the floodgates for similar applications for privileged material in any case where a dispute entailed the exercise of the Court's discretionary or supervisory jurisdiction.

The three further arguments made by the plaintiffs in favour of disclosure were also unsuccessful:

  • The plaintiffs were not entitled to view the company's privileged documents simply by virtue of being shareholders. Privilege did not belong to the shareholder plaintiffs but rather to the company in whose name the proceeding had been brought
  • The fact that one of the parties to the negotiation was willing to waive privilege was insufficient. The privilege belonged to all parties to the negotiations and, in order to be effective, the waiver must be given by all of them
  • Privilege in the documents had not been waived as a result of the defendant's counsel referring to their existence and purpose during the hearing. The brief summary of the subject matter of the emails did not put the substance of the documents in issue. Therefore, waiver had not occurred.

The McCulloch case confirms the importance which the Courts place on the concept of privilege and the caution with which they approach suggestions that "new" exceptions to its scope should be introduced.