Privilege update: “joint interest exception” … going, going, gone?

27 Feb 2025

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For over 100 years, the so-called “joint interest exception” to legal privilege has prevented trustees from asserting privilege against beneficiaries, and companies from asserting privilege against shareholders (except where the advice concerns adversarial litigation with the trust or company).

In this update, we consider a recent English High Court decision which overturned that rule in relation to companies and shareholders (the so-called Shareholder Rule). The decision might, if adopted at appellate level, materially alter the decision-making framework for directors, and possibly even trustees.[1]

Privilege and the “joint interest exception”

Legal professional privilege is the “right to resist the compulsory disclosure of information“.[2] It is an important rule of law and policy.

Any trustee or company director is likely to be in a position where they are required to take legal advice. However, difficult issues can arise when beneficiaries or shareholders ask to see the advice or, more critically, where a trustee or company is under a disclosure obligation.   For at least the last 135 years, a rule has developed preventing the trustee or company from withholding that advice (unless given in the context of adversarial litigation). The rule is known as the “joint interest exception” for privilege (in the case of companies and shareholders, the Shareholder Rule).

NZ Supreme Court decision: Lambie Trustee v Addleman

In New Zealand, the “joint interest exception” was considered in 2021 by the Supreme Court, leading to its unanimous judgment in Lambie Trustee v Addleman.[3] That case involved a request by a beneficiary for the trust’s legal advice. The Court ordered the disclosure of almost all the advice requested by the beneficiary.

The outcome in Lambie Trustee was not, at the time, guaranteed. Particularly because of then-recent developments in the law regarding beneficiaries’ rights of access to trust documents.[4]

• In Erceg v Erceg,[5] the NZ Supreme Court held that beneficiaries had no proprietary interest in trust documents. Rather, beneficiaries’ rights of access existed as part of the Court’s inherent jurisdiction to supervise trusts. This analysis followed the Privy Council’s decision in Schmidt v Rosewood Trustee.[6]
• Counsel for Lambie Trustee argued that this meant the “joint interest exception” could no longer be treated as (effectively) a statutory rule. It should (counsel argued) be limited to circumstances where the subject matter of the advice (on the facts) gave rise to an alignment of interests.
• The Supreme Court, however, disagreed - among other reasons (at [80]) because the “joint interest exception” applies in other areas of law, including companies and shareholders.

In contrast, a recent decision of the English High Court (Picken J) has overturned the Shareholder Rule and thrown considerable doubt on the existence of the exception more generally.

English High Court decision: Aabar Holdings v Glencore

Aabar Holdings SARL v Glencore Plc is an ongoing group claim in relation to an allegedly misleading IPO prospectus. Aabar was an indirect shareholder in Glencore. Prior to the first Case Management Conference, a dispute arose whether Glencore could assert privilege against the claimants.

Before the Court were five privilege-related questions. The first question was whether the Shareholder rule exists in English law. Picken J held that it does not - effectively overturing 135 years of case law.

Relevant points from the judgment[7] include:

• The original justification for the Shareholder Rule was that a shareholder has a proprietary interest in the company’s assets. That justification has not reflected company law since the House of Lords’ 1897 decision in Salomon v A Salomon & Co Ltd (which established that a company is a separate legal entity, distinct from its shareholders).
• Over time, the Courts recognised that the “joint interest exception”, was not an absolute rule: “the proposition that a joint interest arises automatically and without more from the status of shareholder is impossible to justify in principled terms”.
• The cases which provide the clearest support for the “joint interest exception” are trustee/beneficiary cases,[8] which rely in part on the allegedly longstanding Shareholder Rule and are therefore somewhat circular (at [96]-[98]).

• His Honour found that: “the concept of joint interest privilege as a freestanding or standalone species of privilege is not supported by the authorities. What there are are cases where privilege arises on other, case-specific grounds that provide no concrete justification for the suggestion that there is an overarching joint interest privilege concept.”

Where to from here?

Aabar may not be the Courts’ last word on this matter.

• The UK Supreme Court declined leave to Aabar for a ‘leapfrog’ appeal direct to the Supreme Court. However, it is possible that Aabar may yet appeal to the Court of Appeal.
• The Privy Council (in right of Bermuda) will hear the appeal in Jardine Strategic Ltd v Oasis Investments II Master Fund Ltd & Ors in March 2025. The issue in that case is “What (if any) is the scope of the joint interest privilege enjoyed by the shareholders and former shareholders of Jardine Strategic Holdings Limited (the “First Appellant”) over legal advice obtained by the First Appellant? Can a company assert privilege over its legal advice against a shareholder only where litigation privilege is established, or from the time that the interests of the company and shareholder became adverse?”
• It is not clear that the New Zealand Courts will follow English and/or Bermudan law, given that our Supreme Court recently turned its mind to this issue – at least in the trusts context (i.e., in Lambie Trustee v Addleman).
• Alternatively, it is possible that the Courts may confine the “joint interest exception” to trustees and abolish the Shareholder Rule.

The most likely outcome for New Zealand may well be that the joint interest exception continues to apply to trustees (following Lambie Trustee) but not companies (following Aabar). The only thing that is certain is that we have not heard the last word in this matter.  

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