Privilege: the key developments in 2024
Insight

The scope and application of legal professional privilege is a topic that troubles both the courts and practitioners alike. While privilege offers a fundamental protection, allowing individuals and companies to seek legal advice without having to disclose those communications to a court or third party, it is an area that is constantly changing and often misunderstood.
After a quiet start to 2024, the latter part of the year saw a number of important judgments on privilege. This briefing rounds up the most important decisions from last year and highlights practical lessons they offer.
Can companies assert privilege against their shareholders?
For over 100 years it has been a rule of English Law that a company cannot claim privilege against its own shareholders, except in relation to documents that were created for the purpose of hostile litigation between the company and that shareholder (the “Shareholder Rule”). In November 2024, the Commercial Court held in Aabar Holdings SARL v Glencore PLC & Ors [2024] EWHC 3046 (Comm) that the Shareholder Rule is unjustifiable and should no longer be applied. There had been increased scrutiny of the Shareholder Rule in the context of group shareholder litigation against listed companies, but this judgment marks a fundamental shift. It will be welcomed by companies of all sizes because it enhances their ability to take legal advice without the fear that the advice might later be used against them, in litigation or otherwise. Conversely, shareholders will find it more difficult to access important information about companies in which they have invested.
In his judgment, Picken J carried out a systematic analysis of the Shareholder Rule and concluded that it lacked any solid foundation. The Shareholder Rule was based in part on old case law which saw the company-shareholder relationship as akin to a trustee-beneficiary relationship. However, it has long been established that a company and its shareholders are separate legal entities and shareholders have no proprietary claim on the company’s assets. That foundation for the Rule had therefore fallen away. The Judge also rejected an alternative justification for the Shareholder Rule as a type of joint interest privilege, where a common interest between company and shareholder deprives the company of the right to claim privilege against its shareholder.
It should be noted that Aabar is a first instance decision and, whilst influential, the judgment does not create a binding precedent for other High Court cases or appeals. The judgment is being appealed and there will be strong interest in the extent to which other courts follow Picken J’s decision in the meantime.
Litigation privilege can apply to materials from investigations
The High Court has confirmed that litigation privilege can apply to documents created in the course of investigations, provided that the dominant purpose of the investigation was for litigation. In NMC Health Plc (in administration) v Ernst & Young LLP [2024] EWHC 2905 (Comm), NMC’s administrators asserted privilege over the records of 140 interviews and five witness statements which had been prepared by the administrators.
The Court accepted that the documents were subject to litigation privilege. Having examined the factual evidence, the Court held that it would be “unreal” to conclude that the dominant purpose for the creation of the documents was anything other than litigation as there was no other reason for the investigation to have been carried out. This decision will be useful for administrators asserting litigation privilege over investigative materials particularly where it can be shown that the investigative work falls outside the normal functions of an administrator and there was no other credible reason for the investigation.
The application of litigation privilege in an investigation context was also considered in Municipio de Mariana v BHP Group (UK) Ltd [2024] EWHC 953 (TCC). Litigation privilege was successfully asserted in relation to notes of interviews carried out by BHP following the collapse of the Mariana Dam. BHP successfully argued that the collapse gave rise to a strong possibility that there would be some form of litigation. The Court accepted that the dominant purpose of the initial investigation, including the witness interviews, was to enable BHP to assess the merits of potential claims against it, to obtain advice on litigation risk and to formulate litigation strategy. Therefore, the claim to litigation privilege was upheld.
Litigation privilege applies to communications, not the identity of those communicating
Filatona Trading Ltd v Quinn Emanuel Urquhart & Sullivan UK LLP [2024] EWHC 2573 (Comm) was a rare example where the High Court granted a Norwich Pharmacal order against a firm of solicitors who were unwittingly mixed up in forgery. Quinn Emanuel was required to disclose the identity of a consultancy from which they had obtained a report that their client had deployed in litigation. The Court held that the identity of the consultancy was not protected by litigation privilege because privilege attaches to communications rather than information or facts related to those communications. Applying the approach in Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) [2022] EWCA Civ 1484 (which we considered in our 2022 privilege briefing), it follows that the identity of those communicating with lawyers will not be privileged unless disclosing that identity would reveal the content of the underlying communications.
Can waiver of privilege in one document lead to a collateral waiver over all legal advice?
Litigators should always be mindful when considering whether privileged material should be deployed to support their client’s case because of the risk of collateral waiver. Where a party chooses to deploy privileged material to support its case, it may also be required to disclose other privileged material relating to the same issue or transaction.
In Gorbachev v Guriev [2024] EWHC 622 (Comm), the claimant chose to waive privilege over a draft chronology prepared by his barrister. The defendant had alleged that the claimant’s account of events had changed since he first issued proceedings. The claimant submitted that the purpose of the waiver was to respond to that allegation, and that the waiver should be limited to one particular draft chronology. The Court did not agree. It held that the claimant had also waived privilege over a later revised version of the chronology and in any documents that evidenced the claimant’s instructions on the contents of the chronology. Disclosing only one version of a document risks giving a misleading impression and deprives the other party and the court of the ability to assess whether what has been disclosed represents all the material relevant to the issue. Parties should therefore avoid waiving privilege in relation to single versions of a developing document.
Similarly, in BM Brazil 1 Fundo de Investimento EM Participacoes Multistrategia & Ors v Sibayne BM Brazil (PTY) Ltd & Anor [2024] EWHC 675 (Comm), the Court considered whether a reference to legal advice in a single paragraph of a witness statement amounted to a waiver of privilege. The witness had stated that the company had taken legal advice and that the board had then proceeded unanimously with certain actions. Statements such as this, which on one view are merely a factual report of the chronology, are often included in witness evidence. In this case the Judge found that the words used by the witness did not amount to sufficient reference to the substance of legal advice to lead to a waiver of privilege, but it is a reminder that great care is needed when any reference to legal advice is made.
Does joint privilege exist between group companies?
It is well established that joint interest privilege can apply where legal advice is shared between a parent company and its subsidiary. However, the same may not be true where privileged material is shared between “sister companies” (ie companies within the same group but which are not parent and subsidiary). In Webb & Anor v Eversholt Rail Ltd & Anor [2024] EWHC 2217 (Ch), the liquidators of a company, 365Co, sought disclosure under sections 235(2)(a) and 235(3) of the Insolvency Act 1986 of all 365Co’s documents which were being held by ERL, a company in the same group. Their application included a request for legal advice relating to 365Co’s business which had been provided by ERL’s in-house lawyers or procured from outside counsel. The application asserted that those documents were subject to joint interest privilege so that ERL could not assert privilege against 365Co. The Judge rejected the application, principally on the basis that it was far too wide and lacked supporting evidence. In so doing, he noted that “sister companies” are not in the same position as a parent and subsidiary when it comes to claims to privilege. In this case, there was no evidence that the relationship between 365Co and ERL would give rise to joint interest privilege. Care should therefore be taken where legal advice is provided or procured by one company within a group on behalf of another company in the group. It cannot be assumed that such advice will be protected by joint interest privilege.
Exceptions to the without prejudice rule
Without prejudice privilege protects from disclosure statements that are made in a genuine attempt to settle an existing dispute. There are exceptions to this protection which have been considered in two judgments in 2024.
In West v Churchill & Anor [2024] EWHC 940 (Ch) the Court considered the ‘estoppel exception’. This allows certain without prejudice statements to be admitted in evidence for the purpose of establishing an estoppel. In this case, the defendant’s defence and counterclaim had expressly referred to without prejudice discussions that had taken place between the parties in an attempt to make good a claim of a proprietary estoppel. The claimant applied to strike out those parts of the pleadings. The Court recognised the existence of the estoppel exception. It also accepted that a party to negotiations may make promises or give assurances that could give rise to an estoppel. However, on the facts of this case the claimant had failed to identify anything more than proposals and agreements ‘in principle’ on which the defendant could not reasonably have relied. There was therefore no estoppel so the relevant parts of the defence were struck out and the counterclaim was dismissed. This decision demonstrates that courts will not allow parties to use the estoppel exception as a back door route to making ‘in principle’ agreements binding.
In Ocean on Land Technology (UK) Ltd v Richard Land & Ors [2024] EWHC 396 (IPEC), the Court considered an application from the claimant to strike out certain parts of the defendants’ witness statements in part on the basis that they referred to without prejudice communications. In response, the defendants argued that the material should be admissible based on two exceptions to the without prejudice rule: (i) the claimants were using the without prejudice rule to cloak “unambiguous impropriety”; and (ii) it was necessary for the Court to see parts of the without prejudice correspondence to enable it to understand an objective fact relevant to the interpretation of a contract (the so-called “interpretation exception”). The Judge analysed the application of each of these exceptions in detail in the judgment. Ultimately, she decided that the exceptions to the without prejudice rule did not apply and the relevant parts of the witness evidence were struck out. The Judge also rejected the defendants’ submission that, if it could be established that an exception applied to any part of the without prejudice material, then all of that material would be admissible. The judgment is a helpful reminder that the Court will not readily apply exceptions to the without prejudice rule.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, January 2025