Knowledge

In Jardine Strategic Limited v Oasis Investments II Master Fund Ltd & Ors (No 2) [2025] UKPC 34 ("Jardine v Oasis"), the Privy Council unambiguously put an end to what was described as the 'Shareholder Rule', a common law rule that seems to have survived more by habit than rationale. The judgment confirms that a company may confidentially consult its lawyers without fear that shareholders (past or present) will later pierce that privilege, absent some other established exception.

The judges hearing the case (the "Board") issued a Willers v Joyce direction, declaring that their determination to abrogate the Shareholder Rule is to be treated as binding in the courts of England and Wales.

Background

The judgment stems from an appeal from the Court of Appeal of Bermuda in a shareholder dispute arising out of a corporate amalgamation. The Appellant was the entity formed by the 2021 amalgamation of Jardine Strategic Holdings Ltd ("JSH") and JMH Bermuda Ltd. The Respondents were 81 minority shareholders (or former shareholders) of JSH. The amalgamation had cancelled all JSH shares converting shareholders' holdings into a right to receive US$33 per share as 'fair value'.

The Respondents, disputing the fair value of their shares, applied under section 106 of the Bermuda Companies Act to have the court determine the fair value and, as part of those appraisal proceedings, they sought discovery of legal advice that had been given to the Jardine Matheson group when determining the fair value of their shares.

The Appellant claimed these documents were privileged, but the Shareholders argued that an exception, the so-called Shareholder Rule, entitled them to access the legal advice, at least in circumstances where the advice was obtained before any shareholder litigation was contemplated. The shareholders argued that, because the advice was paid for out of the company's funds (effectively the shareholders' funds), the company could not claim privilege against them.

The Chief Justice of Bermuda accepted the shareholders' argument and the Court of Appeal dismissed the company's appeal.

Issues

The Board identified the central question as whether Bermudian law recognises the Shareholder Rule, effectively barring a company from asserting privilege against its shareholders (or former shareholders) in litigation between them. 

In analysing this question, the Board considered the justification and scope of the supposed rule. In particular, it considered whether the Shareholder Rule was founded on the notion that shareholders have a proprietary interest in the company's funds (and hence in advice paid for from those funds) or whether it could be justified as a species of joint or common interest privilege arising from the relationship between company and shareholders. 

The Board also considered whether it could adopt a narrower, fact-dependent exception to privilege in these circumstances, whereby a shareholder could access privileged advice only upon demonstrating a sufficient particular joint interest in that specific advice.

Decision

The Board unanimously allowed the appeal, decisively holding that the Shareholder Rule "forms no part of the law of Bermuda" (or that of England and Wales). In other words, a company is entitled to assert legal professional privilege against its shareholders, absent some other established exception. 

Examining the historical justification for the Shareholder Rule, the Board found that it lacked any valid justification in modern law. The original, proprietary rationale was outdated. It is trite that a company's assets belong to the company alone, not to its shareholders. The proprietary justification was "wholly inconsistent with the proper analysis of a registered company as a legal person separate from its members". 

As for the joint interest justification, analogous to other joint privilege scenarios (e.g. trustee-beneficiary, partners, etc.), the Board firmly rejected this contention. References in some cases and commentary to a broad 'joint interest privilege' between companies and their shareholders were misconceived – that term is a label for various specific relationships where privilege is shared, and "each of [those relationships] had something that the company shareholder relationship did not have". It could not be assumed that there is always a community of interest between a company and its shareholders in respect of legal advice and, indeed, the Board observed that shareholders are not a monolith – their interests often vary among themselves and can diverge sharply from the company's interests, as vividly illustrated by the case at hand. 

Lord Briggs and Lady Hale therefore described the Shareholder Rule as "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". The Board emphasised that legal professional privilege is a fundamental right, and exceptions to it must be narrow and clearly justified. A general shareholder-based exception could not be justified. 

The Cayman angle

Whilst Jardine v Oasis will not strictly be binding on a Cayman Islands court as the decision does not relate to a Cayman Islands case, it is notable that the Board said that it disagreed with Kawaley J's conclusion in Re 58.Com Inc 2023 (1) CILR 328 (sitting as a Grand Court judge in the Cayman Islands) that the Shareholder Rule is a form of equitable tempering of the strict consequences of the separate personality of a company. Accordingly, we would expect that, if the issue were argued before a Cayman court, Jardine v Oasis would be followed.

The decision does leave open though the question of the existence and extent of joint or common interest privilege in other relationships, and the Board mentions that it does commonly exist in a trustee/beneficiary situation. This could be particularly interesting in the context of a Cayman Islands Exempted Limited Partnership, where a statutory trust is set up between the General Partner and the Limited Partners, and could be especially relevant where the Partnership Agreement seeks to exclude the Limited Partners' statutory rights to information. That is particularly so in light of the Board's comments about the ability for joint or common interest privilege to co-exist with specific contractual provisions limiting a shareholder's rights to information.

Conclusion

Jardine v Oasis is a landmark decision in the law of legal professional privilege, formally abolishing the so-called Shareholder Rule. By rejecting both the broad rule and any indeterminate, case-by-case exception, the decision underscores the primacy of legal advice privilege – companies (like other legal persons) can seek candid legal advice, knowing it will remain protected even if disputes with shareholders arise.

While the decision helpfully clarifies the position for a Board of Directors seeking legal advice that they need not disclose that advice to shareholders, the situation is arguably now less clear for trustees and beneficiaries (where the interests of beneficiaries between themselves and vis-à-vis the trustee can similarly diverge) based on the reasoning of the Board. Bedell Cristin can assist anyone wondering what their rights to, or obligations to disclose, information are post Jardine v Oasis. 

If you would like any further information, please get in touch with your usual Bedell Cristin contact or one of the contacts listed.