Aabar Holdings S.a.r.l v Glencore Plc [2024] EWHC 3046 (Comm), handed down last week, is a key judgment on the Shareholder Rule. It is therefore of interest to practitioners involved in proceedings between shareholders and companies, especially those instructed in shareholder group actions.

The judgment was in respect of an interlocutory hearing in proceedings brought by shareholder group claimants against Glencore, whose substantive claims are founded on s.90/s.90A of the Financial Services and Markets Act 2000.

The Shareholder Rule – scepticism leading to rejection

The “Shareholder Rule” principle was established in the 1888 case of Gourard v Edison Gower Bell Telephone Co of Europe Ltd (1888) 57 LJ Ch 498. As typically understood, the ‘rule’ is that in English Law a company cannot claim privilege against its own shareholder, save in relation to documents that came into existence for the purpose of hostile litigation against that shareholder.

Since the seminal case of Saloman v Saloman & Co Ltd [1897] AC 22, in which the core principle of the separate legal personality of a company from its shareholders was established, there has been a tension in the case law between the Shareholder Rule and that core principle.

From [35] to [59], Mr Justice Picken summarises the history of the Shareholder Rule from its inception, through Salomon v Salomon and into today. Although scepticism has been levelled at the Shareholder Rule before, particularly by Mr Justice Michael Green in Various Claimants v G4S Plc [2023] EWHC 2863 (Ch), Mr Justice Picken’s summary and analysis goes further. The crux of the analysis is at [56] in which he states that, whatever the position may have been before Salomon, after that case there can be no similarity or analogous position between the company / shareholder relationship and the trustee / beneficiary relationship – the basis on which Gourard was decided. Mr Justice Picken is therefore judicial authority ad idem with Hollander on Documentary Evidence (15th Ed.) at §5-05d, cited at [59], which supports the view that the law should have changed course after Salomon, but did not.

The key finding is at [117] where Mr Justice Picken found that the Shareholder Rule is “unjustifiable and should no longer be applied”. The first issue he was asked to resolve: whether the Shareholder Rule exists, was answered with an unequivocal “no” [168(1)].

Joint interest privilege – the alternative view rejected

Mr Justice Picken then went on to reject the argument that the Shareholder Rule could be justified on the alternative basis that it could be a version of ‘joint interest privilege’. This alternative view had been raised in some previous cases and was a question raised in Hollander on Documentary Evidence (15th Ed.) at §5-05d.

That the Shareholder Rule could be applied as a blanket ‘joint interest privilege’ rule was unequivocally rejected and on three bases:

• Firstly, there was no binding authority for the position, which had emerged only from obiter comment [93].
• Secondly, Mr Justice Picken accepted the proposition that where joint interest privilege had been addressed in the authorities, it was in reality “merely an umbrella term that has been used to describe a variety of different situations in which one party is unable to assert privilege against another, not because of there being any such freestanding concept but on other, narrower and more conventional grounds.” [94].
• Thirdly, Mr Justice Picken saw no reason for the rule as a matter of principle [106].

Whether ‘joint interest privilege’ could apply would depend on the particular facts and circumstances, in the ordinary way [118].

The Limits of the Shareholder Rule (should it exist)

Mr Justice Picken went on to consider the limits of the Shareholder Rule, should it be found to exist. Those limits were that:

• It would not apply to without prejudice privilege [130]
• The relevant point of time for the shareholder is when the communication was made, not whatever the current position is [153]. Consistent with that, it could not be invoked by a subsequent purchaser of shares from the shareholder at the time the relevant documents were created [157]
• It would apply to privileged documents belonging to the subsidiary of the company in which the shareholder held its shares [167]

Conclusion

This judgment is vital reading for practitioners, particularly those engaged in group shareholder actions.

If you would like to discuss the contents of this article further, please contact Nick Jones or Matthew Marshall.