Aabar Holdings SARL v Glencore PLC & Ors

The Shareholder Rule should no longer be applied in English law. Its historical proprietary justification disappeared when the separate legal personality of companies and the absence of any shareholder interest in company assets became established. A freestanding doctrine of joint interest privilege is not supported by authority and cannot justify depriving a company of legal professional privilege.

Alternatively, any such rule would be context-sensitive and would not confer an automatic right to inspect company advice. It would not extend to without prejudice privilege. On the alternative assumption that the rule exists, beneficial ownership and a later transfer of the relevant cause of action may suffice, and the rule may in principle extend to subsidiary documents where the necessary joint interest is established.

Aabar, an ultimate beneficial investor in Glencore shares held through intermediaries, challenged Glencore’s proposed withholding of privileged documents in coordinated shareholder claims arising from alleged misconduct and disclosure-related misstatements.

The court determined four preliminary issues: whether the Shareholder Rule exists; whether it applies to legal advice, litigation and without prejudice privilege; whether it applies to an ultimate beneficial owner and a successor in title; and whether it extends to privileged documents of subsidiaries. Issue 5, concerning particular document categories, was not presently feasible to determine.

1. Issue 1. The Shareholder Rule was held not to exist, or no longer to be applicable, in English law. The early authorities, including Gouraud and Woodhouse, rested on a proprietary or trust-like analysis which is inconsistent with separate corporate personality. Later decisions largely assumed the rule without analysing its foundation.
2. The expression “joint interest privilege” does not establish a freestanding privilege. It is a convenient description of different situations explained by narrower grounds, including proprietary rights, contractual access rights, joint retainers or the court’s supervisory jurisdiction. A shared economic interest alone is insufficient.
3. Alternative analysis. If the rule exists, it is not absolute. Whether a sufficient joint interest exists depends on the circumstances and context of the particular communication. It does not give a shareholder an automatic right to inspect all company legal advice.
4. Issue 2. On that alternative assumption, the rule could apply to legal advice privilege and litigation privilege, but not to without prejudice privilege. Without prejudice communications involve the company and a third party, rest on an implied agreement and public policy favouring settlement, and cannot ordinarily be disclosed unilaterally to shareholders.
5. Issue 3. An ultimate beneficial owner of intermediated securities may, in principle, establish the relevant interest despite not being the registered shareholder. The relevant time is when the communication was made, so a later sale of the shares does not retrospectively defeat the right. A successor in title stands in the predecessor’s shoes, subject to the scope of the transferred cause of action. A subsequent purchaser of shares cannot invoke the rule for documents created before acquisition.
6. Issue 4. On the alternative assumption that the rule exists, it may in principle extend through a chain of holding companies to subsidiary documents, but only where the requisite joint interest is established on the facts.
7. The answers were therefore: Issue 1, no; Issue 2, yes for legal advice and litigation privilege and no for without prejudice privilege; Issue 3, yes on both matters; and Issue 4, yes in principle.