Introduction
On 24 July 2025, the Privy Council delivered a landmark decision that fundamentally reshapes the landscape of legal professional privilege in the context of corporate and shareholder disputes. In Jardine Strategic Holdings Ltd and another v Oasis Investments II Master Fund Ltd and 80 others (No 2) (Bermuda) [2025] UKPC 34, the Board swept away the "Shareholder Rule" – a c.140-year-old exception that had prevented companies from asserting legal advice privilege against their shareholders in (most) litigation.
The decision represents more than a technical adjustment to privilege law; it marks a decisive victory for corporate confidentiality and signals the courts' recognition that modern company law and corporate practice have evolved far beyond 19th century economic life.
Genesis of the Dispute
The case arose from a corporate amalgamation within the Jardine Matheson group in April 2021. When Jardine Strategic Holdings Ltd merged with JMH Bermuda Ltd, dissenting shareholders were offered $33 per share as "fair value" for their cancelled shares (para 2). Unsatisfied with this valuation, over 80 shareholders commenced appraisal proceedings under section 106(6) of Bermuda's Companies Act 1981, seeking judicial determination of fair value (para 60).
In discovery, those shareholders sought disclosure of the company's privileged legal advice obtained before the amalgamation. Their weapon of choice was the Shareholder Rule – the (apparently) well-established principle that companies could not withhold documents from shareholders on grounds of legal advice privilege, save in relation to 'hostile' litigation (para 6). Such hostile litigation did not even, for the most part, extend to unfair prejudice or contested just & equitable winding up petitions: Re Hydrosan Ltd [1991] B.C.C. 19; Arrow Trading & Investments Est 1920 v Edwardian Group Ltd (No.2) [2004] B.C.C. 955.
The Long Shadow of Victorian Jurisprudence
The origins of the Shareholder Rule are generally traced to Gouraud v Edison Gower Bell Telephone Co of Europe (1888) 57 LJ Ch 498, where Chitty J reasoned that "a party cannot resist production of documents which have been obtained by means of payment from the moneys belonging to the party applying for their production" (para 28). This proprietary justification – that shareholders had paid for the advice through their interest in company funds – became entrenched in English law despite the obvious tension between that analysis of the shareholder-company relation and the fundamental Salomon v Salomon principle that companies possess separate legal personality (para 31).
For nearly 140 years, courts mechanistically – but with murmurings of discontent – applied this rule without serious examination of its foundations or justification in law, and, as the Board observed in Jardine, "the original proprietary justification for the Shareholder Rule just faded quietly away, without anyone apparently noticing" (para 33).
Modern Attempts at Justification
Recognising the collapse of the proprietary basis, some modern commentators and courts attempted to rehabilitate the rule as a species of "joint interest privilege." This rationale suggested that companies and shareholders shared sufficient common interests to justify denying privilege between them – analogous, it was said, to relationships between trustees and beneficiaries, or partners in joint ventures (para 42).
The Bermuda Court of Appeal embraced this approach in Jardine, with Bell JA holding that joint interest privilege applied to legal advice relating to share valuation (para 71) and Kawaley JA taking the (more nuanced but less certain) position that joint interest should be determined on the specific facts of each case rather than applying automatically where there is a company-shareholder relationship (para 73).
The Board's Definitive Rejection
The Privy Council rejected this approach of the Bermudan Court of Appeal and dismantled all attempted justifications for the Shareholder Rule. Lord Briggs and Lady Rose, delivering the Board's judgment, identified fatal flaws in each theoretical foundation.
The Proprietary Fallacy
The Board rejected the original proprietary justification as "wholly inconsistent with the proper analysis of a registered company as a legal person separate from its members such that the members have no proprietary interest in the funds of the company used to pay for the advice" (para 80). This foundation had been undermined for over a century by deeply established and fundamental principles of company law:
"The status-based automatic Shareholder Rule is therefore now, and in truth has always been, a rule without justification. Like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the Rule is altogether unclothed." (para 82)
The Joint Interest Mirage
More significantly, the Board also rejected the joint interest justification as a "serious oversimplification" (para 86):
"In reality, particularly in a large company, the interests of different classes of shareholders may diverge. Even within a single class, there may be real differences in outlook between, for example, those who wish to maximise dividend return and those who would prefer long term capital growth" (para 86).
The Jardine case itself exemplified this divergence. With Jardine Matheson owning over 85% of shares and the minority shareholders facing compulsory acquisition, their interests were fundamentally opposed: the minority wanted high valuations while the majority (effectively paying for the shares) preferred low prices (para 99).
In dismissing Kawaley JA's more nuanced attempt to keep alive the Shareholder Rule, the Board emphasised that legal professional privilege requires certainty if parties are to candidly seek legal advice without fear of subsequent disclosure (or indeed substantial and costly satellite disputes over the same):
"The approach adopted by Kawaley JA requires an open-textured assessment to be made as to whether the interests had been joint in the particular circumstances. The very uncertainty whether, in relation to a particular matter for decision, there was or was not the coincidence of interest between company and shareholders sufficient to engage the exception from privilege would make it all but impossible for directors to know, when deciding whether or not to seek legal advice, whether the advice once received would be privileged from production to shareholders in the event of subsequent litigation between them. In order for privilege to deliver its intended objective, there must be reasonable certainty as to whether it will or will not apply on a particular occasion for the taking of legal advice. A general rule that privilege would not be available, subject to fact-sensitive exceptions, would be even worse. Directors would just have to make the general assumption that they could not obtain legal advice in confidence.
The open-textured, fact-specific approach advocated by Kawaley JA failed this objective, creating an "insuperable problem" where directors could not, in practice, know when seeking advice for the company whether it would later be protected from disclosure in litigation 'against' its, or some of its, shareholders (para 96).
The rule abolished
The Board therefore abolished the Shareholder Rule altogether.
It also gave a Willers v Joyce direction that English and Welsh courts should treat the Jardine decision of the Privy Council as representing the position in domestic law (para 113), preventing the uncertainty that would arise from divergent approaches (and avoiding yet further English appeals on whether the Shareholder Rule might limp on in this jurisdiction...)
Practical Implications
First, the decision immediately strengthens companies' ability to obtain confidential legal advice without fear of compelled disclosure to shareholders in due course. This is particularly significant for:
- Corporate transactions where shareholder and company interests have diverged (or might later diverge).
- Governance matters involving conflicts between shareholder classes.
- Strategic legal advice in matters which are already hostile (in a non-technical sense) between company and one or more, but not the majority, of its shareholders.
Second, the judgment will be of significant comfort to companies currently embroiled in shareholder litigation across the various jurisdictions in which Jardine is now the leading authority. Many such cases were awaiting the outcome of the Jardine appeal. However, more interesting questions perhaps arise:
- Where disclosure of such privileged material has already been given to a shareholder, in ongoing proceedings, on the basis of a rule which has now been held not to exist at all; and
- In relation to the rather undefined category of 'joint interest privilege' generally. The Board was careful to limit its analysis to the company-shareholder relationship, leaving open for another time a "general review of what has come to be known as joint interest privilege" (para 84) and Jardine leaves open questions about the scope of joint interest privilege in other contexts with which the courts will likely need to grapple in due course.
Third, the Board's analysis reflects a more sophisticated understanding of contemporary corporate life than justifications for the Shareholder Rule would permit. Modern, large companies operate in complex stakeholder environments where directors must balance the competing, and sometimes conflicting, interests of shareholders, creditors, employees, and other constituencies:
"The directors of a large modern sophisticated company have the constant and difficult task of finding their way to a reliable perception of their company's best interests while paying appropriate attention to the interests and wishes of their many different classes of stakeholders" (para 88).
That is to say nothing of how unsuitable the rule was for publicly traded company (a point which nevertheless had failed to move the dial in CAS (Nominees) Ltd v Nottingham Forest plc [2002] BCC 145).
The Board's emphasis on forward-looking certainty over fact-specific flexibility signals a preference for bright-line – or at least vaguely predictable – rules in privilege determination and a desire to keep satellite litigation over such issues to a minimum. That will be well received both by corporates involved in litigation and their legal teams conducting (already painful) disclosure exercises!
Fourth, the decision demonstrates the courts' willingness to jettison historical anomalies that lack principled foundation, regardless of their longevity in the black letter law. As Lord Briggs and Lady Rose observed in Jardine, "Like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the Rule is altogether unclothed" (para 82).
Conclusion
In our view, Jardine marks the definitive end of a legal anachronism that had survived long past its theoretical expiry date. By prioritising legal and practical certainty and the modern corporate reality, the Privy Council has strengthened companies' fundamental right to seek confidential legal advice without fear of disclosure to (hostile or potentially hostile) classes of shareholders.
The Board has cleared away Victorian-era debris to reveal the solid foundations of legal professional privilege that lie beneath.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
