Privy Council’s ‘landmark’ privilege ruling
Lawyers at A&L Goodbody say that a recent rejection of the ‘Shareholder Rule’ by Britain’s Privy Council is likely to be of significant interest to the Irish courts.
The lawyers were commenting on what they describe as “a landmark judgment” by the body’s judicial committee in July.
The ‘Shareholder Rule’ allowed shareholders to access a company’s privileged legal advice in litigation with the company, if the advice pre-dated the dispute.
In a note on the firm’s website, ALG explains that the rule was effectively an exception to legal-advice privilege that prevented a company from asserting privilege over legal advice against its shareholders in subsequent litigation.
‘No basis’ for rule
“Although the ‘Shareholder Rule’ had applied in England and Wales for over 135 years, the Privy Council found no basis for the rule and held that a company can assert legal professional privilege against its shareholders,” the firm says.
Its lawyers note that, in delivering the judgment, the Privy Council made a rare ‘Willers v Joyce direction’, which means that the ‘Shareholder Rule’ has been abolished not only in Bermuda (from where the appeal was brought) but also in England and Wales.
The case, Jardine Strategic Limited v Oasis Investments II Master Fund Ltd No 2, arose after two Jardine Matheson group companies amalgamated in April 2021.
A group of dissenting shareholders disagreed with the price offered for their shares and started proceedings in Bermuda, during which they sought disclosure of legal advice that the company had received on the price level.
The company claimed legal professional privilege over the advice, but the Bermudan courts ordered disclosure. The defendant company appealed to the Privy Council.
Irish courts
Among the reasons given by the council for its decision was its finding that there will not always be a presumed ‘joint interest’ between a company and its shareholders, or between shareholders themselves, as their interests will often diverge.
The ALG lawyers say that, although there has been limited judicial reference to the ‘Shareholder Rule’ in Ireland, the Irish courts have applied it recently in two shareholder oppression claims – Carlo Tassara Asset Management SA v Eire Composites Teoranta and Re Brock Delappe Ltd.
“Following the emphatic rejection of the ‘Shareholder Rule’ in Jardine, along with judgments from other common-law jurisdictions such as Canada and Australia refusing to apply the ‘Shareholder Rule’ or casting doubt on its validity, the rationale for its continued existence in Ireland is likely to be open to question,” the firm concludes.