Appleby Bermuda’s Head of Dispute Resolution, John Wasty, and Counsel Khiyara Krige and Jordan Knight are pleased to have acted as Bermuda Counsel for Jardine Strategic Limited, together with Erskine Chambers and Linklaters, in its appeal before the Privy Council, successfully challenging the existence of “the Shareholder Rule” – an exception to the law of privilege that has been applied in various common law jurisdictions for almost 140 years.
On 24 July 2025, the Judicial Committee of the Privy Council (the Privy Council or the Board), the highest court of appeal for Bermuda and several other Commonwealth jurisdictions delivered a landmark decision[1] that abolished the general rule, which has long been recognised as forming part of English law, that a company cannot, in the course of litigation between it and shareholders, withhold documents from inspection of the ground that the documents are covered by legal advice privilege. This has commonly been referred to as “the Shareholder Rule.” This decision is binding not only on the countries over which the Privy Council has jurisdiction, but also binds the Courts of England and Wales, pursuant to direction given by the Board.
Background: The Shareholder Rule
The Shareholder Rule was the previously recognised principle under English law that a company may not assert privilege against its shareholders in litigation, save in relation to documents that came into existence for the purpose of hostile litigation against that shareholder. The Shareholder Rule was an exception to legal advice privilege, which usually protects confidential communications between a client and their lawyer for the purpose of obtaining legal advice. This rule had its origins in late 19th century English case law, where it was originally justified on the basis that shareholders have a proprietary interest in the assets of the company and therefore were entitled to see legal advice paid for out of the company’s funds. This was based on an analogy with a rule that applied in litigation between trustees and beneficiaries, that trustees could not claim privilege against beneficiaries for legal advice taken and paid for at the beneficiaries’ expense. The Shareholder Rule, however, was formulated before the House of Lords’ decision in Salomon v Salomon & Co Ltd [1897] AC 22 which established that a company has separate legal personality, distinct from its shareholders, and that a company is the legal and beneficial owner of its property (and that shareholders have no proprietary interest in the company’s assets). Notwithstanding its inconsistency with these fundamental principles of company law, the Shareholder Rule was accepted and applied in the Courts of England and Wales for almost 140 years.
In more recent decisions, and leading practitioner textbooks, a modern justification for the Shareholder Rule had developed – that shareholders and the company share a joint interest in legal advice taken by the company. Provided a joint interest existed between the company and its shareholder at the time that the advice came into existence, the company could not assert privilege against its shareholder. This reasoning fell within the broad principle known as “joint interest privilege” which has been recognised in the context of certain types of relationships such as principal and agent, parties to a commercial joint venture, reinsurer and reinsured, trustee and beneficiary.
Background: The Case and Its Context
The Privy Council handed down judgment in Jardine Strategic Holdings Ltd and another (Appellant) v Oasis Investments II Master Fund Ltd and 80 others (Respondents) No 2 (Bermuda) on 24 July 2025, following a one-day appeal hearing on 6 March 2025. This was an appeal from the 5 March 2024 decision of the Court of Appeal for Bermuda (Court of Appeal Decision), which in turn concerned an appeal from two related 2023 decisions of the Supreme Court of Bermuda (Supreme Court Decision).
The background to these appeal proceedings is as follows.
In April 2021, over 80 plaintiff shareholders commenced appraisal proceedings against Jardine Strategic Limited in the Supreme Court of Bermuda, under section 106(6) of Bermuda’s Companies Act, following an amalgamation involving Jardine Strategic Holdings Limited which took effect on 14 April 2021, the product of which was the appellant company, Jardine Strategic Limited (the Company).
Under Bermuda company law, shareholders of a company must be invited to a special general meeting to approve a proposed amalgamation of the company in accordance with section 106 of the Companies Act 1981. The notice of that special general meeting must state the “fair value” of a share in the company in question. Shareholders who do not approve the proposed amalgamation are entitled to be paid fair value or, if they are not satisfied with the statement of fair value in the notice of the special general meeting, apply to Court to determine fair value by commencing appraisal proceedings.
In the context of the appraisal proceedings, the plaintiff shareholders brought a discovery application, seeking, amongst other things, disclosure of the Company’s privileged legal advice taken before the amalgamation, by way of application of the Shareholder Rule, i.e. that a company may not withhold documents from inspection in litigation against its shareholders on the ground that the documents are covered by legal advice privilege.
Supreme Court Decision
On 14 February 2023, Chief Justice Hargun decided the plaintiff shareholders’ application for discovery of documents under the Shareholder Rule. Chief Justice Hargun accepted that the Shareholder Rule was an established part of English Law, and despite the Company’s submissions that the rule should not be imported into Bermuda law, considered that he was bound by an earlier decision of the Court of Appeal for Bermuda that accepted the Shareholder Rule. As a result, the Chief Justice ordered the Company to produce documents over which it asserted privilege on the grounds that a company may not assert privilege against its shareholders.
Court of Appeal Decision
The Company appealed Chief Justice Hargun’s judgment, giving the Court of Appeal the opportunity to revisit the issue. The Court of Appeal upheld the Shareholder Rule. In a judgment given on 5 March 2024, Bell, JA dismissed the Company’s appeal against the Shareholder Rule, finding that shareholders and a company had a joint interest in legal advice given to a company.
Kawaley JA agreed that the Company’s appeal should be dismissed but offered a more nuanced and limited formulation of the rule, finding that the Shareholder Rule does not apply automatically. Instead, Kawaley JA found that the Shareholder Rule gives a shareholder standing to assert a joint interest in legal advice given to a company, but that whether or not such joint interest should be recognised would depend on the facts and circumstances of each case. Following the assertion of a joint interest, the Court would have to decide whether, in the circumstances, the legal advice in question was in respect of a matter which directly engaged the interests of the company’s shareholders in a way that was “reasonably discernible”.
Decision of the Privy Council
The main issue before the Privy Council was whether the Shareholder Rule should continue to exist and be recognised as part of the law of Bermuda and England and Wales. The Board considered three possible justifications for the rule, namely (1) the original proprietary basis for the rule, (2) joint interest privilege and (3) the more limited and nuanced formulation of the rule adopted by Kawaley JA at the Court of Appeal for Bermuda. The Board rejected all three for the following reasons:
The Board summarily rejected the original proprietary or status-based justification for the rule (as described above) on the basis that it was “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.”[2]
The Board also rejected the joint interest justification for the Shareholder Rule, which had been accepted by the Court of Appeal and relied upon by the Respondents in their submissions. The Board held that the company shareholder relationship does not have a sufficient analogy with the other classes of relationship in which joint interest has been recognised. In support of the joint interest justification for the Shareholder Rule, the Respondents had submitted that, “as long as a company is solvent, its interests as a separate legal person are frequently aligned with those of its shareholders.”[3] The Board rejected this as a serious oversimplification, based on an incorrect assumption that the interests of shareholders are generally aligned. The Board noted that even within a single class of shareholders, there may be significantly differing interests.[4] Furthermore, a solvent company has stakeholders beyond shareholders whose interests must be considered, including its workforce.[5] In rejecting the joint interest justification of the rule, the Board recognised that “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, when making decisions, large and small, about the management and direction of the company’s business. Many of those decisions will need, or at least benefit from, candid, confidential, legal advice.” [6] The Board noted that recognition of the Shareholder Rule “would discourage companies from obtaining candid legal advice in confidence.”[7]
Finally, the Board respectfully disagreed with the more limited and nuanced application of the Shareholder Rule formulated by Kawaley JA in the Court of Appeal Decision. The Board considered that the approach adopted by Kawaley JA did not provide sufficient certainty to enable a company’s directors to know, when considering whether or not to seek legal advice, whether the advice would be privileged in any subsequent shareholder litigation.[8] The Board recognised “the need for certainty as to whether legal advice will be privileged or not demands a bright line, otherwise it will fail to serve the objective of encouraging the taking of legal advice.”[9]
In its judgment, the Board described legal professional privilege as a “fundamental condition on which the administration of justice as a whole rests.” It concluded that the Shareholder Rule, whether based on its original or more modern justifications, should not be part of the law of Bermuda or any other jurisdiction where the Privy Council’s rulings are binding. Furthermore, the Board gave a Willers v Joyce direction that the domestic courts of England and Wales should treat this decision as also representing the law of England and Wales.
Practical Impact
The decision clarifies that companies are entitled to assert legal advice privilege against their shareholders in litigation. Directors can now seek legal advice with the assurance that it will remain confidential, even in disputes with shareholders. The ruling will be of particular relevance to companies operating in Bermuda, the UK, and other jurisdictions within the Privy Council’s purview.
[2] Paragraph 80
[3] Paragraph 85
[4] Paragraph 86
[5] Paragraph 87
[6] Paragraph 88
[7] Paragraph 89
[8] Paragraph 93
[9] Paragraph 94
