Privilege update: Privy Council confirms the shareholder principle no longer applies in England & Wales

We have previously written about the potential death of the shareholder principle; see Privilege in Shareholder Disputes: Is Change Afoot? and A Nail in the Coffin of the Shareholder Principle. The recent Privy Council decision in Jardine Strategic Limited v Oasis Investments II Master Fund Ltd & Ors No 2 confirms what we suspected; the shareholder principle no longer exists in England & Wales.
 

As noted in those previous articles, in the 2024 case of Aabar v Glencore Mr Justice Picken gave a landmark ruling and decided that the general “shareholder principle” does not exist in English law. The Claimant sought to appeal directly to the Supreme Court. However, the Supreme Court declined the leapfrog appeal, taking the view that the same issue would be resolved in an upcoming Privy Council decision in Jardine Strategic Limited v Oasis Investments II Master Fund Ltd & Ors No 2.

That judgment is now out and confirms that the shareholder principle should no longer be recognised under English law. The Board of the Privy Council held that held that the status-based automatic shareholder rule is “now, and in truth has always been, a rule without justification".

In summary, the Board found that:

1. The traditional proprietary justification was not consistent with the proper analysis of a registered company as a legal person, separate from its members;
2. An alternative justification based on joint interest privilege was also rejected. The idea that a company’s interests would always be aligned with those of its shareholders (and indeed that the interests of the shareholders themselves would always be aligned) was a serious oversimplification;
3. A more nuanced “case by case” approach was also rejected, as it would create unacceptable uncertainty. 

The Privy Council also issued a “Willers v Joyce direction”, which means that the decision binds the courts of England and Wales, thereby confirming the position following Aabar v Glencore.

This is an important decision for those involved in company-shareholder disputes. It means that shareholders will no longer be able to rely on the shareholder principle to obtain copies of privileged legal advice that they would otherwise not be entitled to see.