Aabar Holdings SARL v Glencore PLC & Ors

The court was asked to determine whether the long‑recognised so‑called "Shareholder Rule" — the principle that a company cannot assert legal professional privilege against its shareholder except where the documents were created for the dominant purpose of hostile litigation between company and shareholder — is part of English law and, if so, its scope. The court concluded that the historical proprietary rationale for that rule no longer survives Salomon and that the modern assertion that it rests on a freestanding "joint interest privilege" is unsupported on authority and unprincipled in the company/shareholder context. Accordingly the judge held that the Shareholder Rule does not exist as a general principle of English law.

In the alternative, if the Shareholder Rule were to be treated as surviving, the court accepted (following recent authority considered in Jardine) that any such rule would operate only in a fact‑sensitive way: it would apply to legal advice privilege and litigation privilege where the shareholder and company had a sufficiently discernible joint interest when the communication was made, but would not extend to without prejudice communications. The court also held that, where a joint interest exists, it can extend to a successor in title to a shareholder (including the beneficial owner of intermediated securities) and, in principle, to relevant privileged documents of subsidiary companies within a corporate group, provided the requisite joint interest is established.

Background and parties: Aabar Holdings S.à.r.l. (Aabar) brought claims against Glencore Plc and certain former directors. Aabar alleges it was the ultimate beneficial owner of shares in Glencore via Commodities S.à.r.l. and brings claims under s.90 and s.90A of the Financial Services and Markets Act 2000 and under the common law. Glencore asserted privilege over categories of documents and Aabar challenged Glencore’s entitlement to withhold those documents relying on the Shareholder Rule.

Nature of the application: The hearing concerned five discrete issues of principle agreed for determination: (1) whether the Shareholder Rule exists in English law; (2) whether it covers legal advice privilege, litigation privilege and without prejudice privilege; (3) whether it extends to Aabar given its beneficial (but not registered) interest and its present non‑shareholder status; (4) whether it extends to privileged documents of group subsidiaries; and (5) (not practically addressed at the hearing) whether inspection could be withheld across identified document categories.

Issues framed:

• Issue 1: Existence and basis of the Shareholder Rule.
• Issue 2: Scope of privilege types to which it applies.
• Issue 3: Application to beneficial/intermediated holders and successors in title.
• Issue 4: Application to subsidiary companies’ privileged documents.

Court’s reasoning and conclusions: The judge reviewed the historical authorities (including Gouraud, Woodhouse and subsequent cases) and recent appellate and first instance decisions (including Dawson‑Damer, Sharp, G4S and Jardine). He concluded that the old proprietary justification for the Shareholder Rule (that shareholders have a proprietary interest in company assets and so in advice paid for from company funds) cannot survive the separate legal personality established in Salomon. He analysed the proposition that the rule is founded on a freestanding "joint interest privilege" and concluded that the authorities do not establish such a freestanding doctrine applicable as a general rule to the company/shareholder relationship. The court expressed policy and doctrinal concerns about treating shareholders (particularly in large, dematerialised and intermediated holdings) as immune recipients of a company’s privileged material, including the risk of undermining the public policy underpinning legal professional privilege.

The court therefore answered the issues as follows: Issue 1 — no, the Shareholder Rule does not exist as a general principle; Issue 2 — if the rule did exist, it would cover legal advice privilege and litigation privilege but not without prejudice privilege; Issue 3 — on the alternative hypothesis that the rule exists, it would extend to an ultimate beneficial owner and to a successor in title for documents created while the predecessor held the shares; and Issue 4 — in principle it can extend to subsidiary companies’ privileged documents where a sufficient joint interest exists.

Procedural posture: This is a first‑instance determination of privilege issues in the Financial List; the court gave detailed reasons and alternative analysis in the event higher courts prefer to maintain a qualified Shareholder Rule.

The court determined the parties’ privilege issues. Primary holding: the Shareholder Rule does not exist as a general principle of English law because its historic proprietary rationale no longer survives Salomon and there is no sound authority or principle to support a freestanding joint interest privilege that would operate as a blanket exception between company and shareholder. Alternatively, if the Shareholder Rule is taken to exist, it is limited and fact‑sensitive: it can apply to legal advice privilege and litigation privilege where a shareholder and company had a sufficiently discernible joint interest when the communication was made, but it does not extend to without prejudice communications; it may extend to successors in title and to subsidiary companies’ privileged documents in principle where the requisite joint interest is proved. The court answered the five agreed issues accordingly.