On 24 July 2025, the Privy Council handed down a landmark judgment reaffirming the privileged nature of a company’s legal advice.
In Jardine Strategic Holdings Ltd v Oasis Investments II Master Fund Ltd No 2,1 the Privy Council abolished the so-called ‘Shareholder Rule’.
The ‘Shareholder Rule’ had stood in England for almost 140 years. It provides that a company cannot rely on legal advice privilege when the advice is relevant to a dispute with a shareholder.2
Originally, the Shareholder Rule was justified on the basis that the shareholders had a proprietary interest in the assets of the company and had “paid for” the advice. More recently, the Shareholder Rule has been justified on the basis that the company and the shareholders had a ‘joint interest’ in the advice – in a manner similar to trustees/beneficiaries, joint venturers or partners.
The Privy Council found the Shareholder Rule to be without foundation, “like the emperor wearing no clothes in the folktale, it is time to recognise and declare that the Rule is altogether unclothed”.3
In particular, the Privy Council:
- rejected the proprietary justification as inconsistent with the separate legal personality of the company;
- rejected the 'joint interest' justification on the basis that there is very often a divergence of interests between shareholders and the company – noting that the directors of a company must take account of a range of stakeholders when making decisions; and
- rejected any “narrower” or “more nuanced” approach turning on whether, on the particular facts of the case, there was a sufficient joint interest in the advice. That would produce unworkable uncertainty for the company, which needed to know at the time the advice was sought, whether the advice would be privileged.
In Jardine itself, the advice related to the amalgamation of two companies within the Jardine Matheson group. The dissenting shareholders were entitled to be paid “fair value” for their shares, as determined by the Court. In the litigation which followed, the shareholders sought disclosure of the Company’s legal advice on the amalgamation. While disclosure was ordered in the Courts below due to the Shareholder Rule, the Privy Council upheld the company’s claim of privilege.
Impact in New Zealand
New Zealand recognises the ‘joint interest’ exception to legal advice privilege – both at common law and under the Evidence Act 2006.
The application of the Shareholder Rule has not been squarely determined as a matter of New Zealand law. The Supreme Court referred to the existence of the Rule in Lambie Trustees Limited v Addleman.4 However, Lambie Trustees was concerned with the position of trustees and beneficiaries. The Shareholder Rule was not the subject of the Supreme Court’s decision, and the English authorities it referred to were amongst those rejected by the Privy Council.
Other New Zealand decisions also refer to the Shareholder Rule, but do not squarely establish it.5 They also do not provide any reasoning which meets the powerful arguments set out in the Privy Council’s decision.
The Privy Council’s decision, on appeal from the Court of Appeal of Bermuda but also addressing English law, is not binding on New Zealand Courts. However, we expect the principles it articulated will be influential when the New Zealand Courts next consider the issue. Directors may now be increasingly confident that a company’s legal advice will remain privileged.
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[1] Jardine Strategic Holdings Ltd v Oasis Investments II Master Fund Ltd No 2 [2025] UKPC 34 – available here.
[2] The position of documents subject to litigation privilege is different.
[3] At [82].
[4] Lambie Trustees Limited v Addleman [2021] NZSC 54 at [72] and [80]. A similar assumption had been made by the UK Supreme Court in James-Bowen v Commissioner of Police of the Metropolis [2018] UKSC 40 at [45], but this was given short shrift by the Privy Council.
[5] E.g. Kupe Group Ltd v Auckland City Council (1989) 2 PRNZ 60; Katoria Trustee Limited v Toon [2022] NZHC 3037;
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
