English courts look ahead after landmark year for privilege in legal proceedings

The law of legal professional privilege in England and Wales had a busy year in 2024. Long-standing "rules" were overturned. There were unsuccessful attempts to expand some forms of privilege, alongside the restriction and restatement of others. All of which has built anticipation of what this year will bring.

The end of the 'shareholder rule'

In November 2024, the long-standing "shareholder rule", which prevented a company from claiming privilege against its own shareholders – save for in limited circumstances – was dismantled. The High Court ruled in Aabar Holdings v Glencore and others that the rule simply did not exist in English law, should no longer apply and "was no longer justifiable".

A challenge to the shareholder rule had been on the cards for some time. However, the Glencore decision has significant implications for both companies and shareholders, as privilege may be asserted against shareholders in the same way as against any other third party – at least for now.

While the decision is set for Supreme Court consideration in 2025, in the meantime, shareholders' ability to pursue actions against a board or even to test the accuracy of advice received by a company have been significantly curtailed. 

Joint interest privilege

In considering the shareholder rule in Glencore, Mr Justice Picken turned his analysis to "joint interest privilege", questioning whether it could be considered to have any independent existence as a concept – and finding that it could not.

His view was that joint interest privilege, which is often invoked to allow otherwise privileged documents to be shared where "a joint interest has been held to arise" (that is, between trustees and beneficiaries; parent companies and wholly owned subsidiaries; companies and their directors; and others) is simply an "umbrella term", rather than a standalone form of privilege, and it cannot arise purely due to the fact of a claimed shared interest.

Without prejudice v mediation privilege

The protection given by without prejudice privilege is a key motivator for parties preparing to enter a mediation – so much so that alternative dispute resolution (ADR) commentators have suggested that a new type of "mediation privilege", distinct from the without prejudice rule and with narrower exceptions, should be created to further encourage settlement via ADR. Mediation privilege would, for example, protect a third-party mediator from being required to appear as a witness or produce mediation documents. 

In Pentagon v BCL, the High Court concluded that despite the need to promote ADR as a means of settling disputes, the establishment of a "mediation privilege" distinct from without prejudice privilege was not yet supported by the authorities. It was also noted that enhanced protection of statements made during mediation could be achieved by the parties' mediation contract, and duties of confidentiality.

Legal professional privilege in FOIA proceedings

In August 2024, the First Tier Tribunal clarified the scope of legal professional privilege in the context of the FOIA. In Chief Constable of the Police Service of Northern Ireland v The Information Commissioner the tribunal was asked whether the UK's information commissioner has the power – in order to assess whether a claim of privilege by a public authority was justifiable under section 42(1) of the FOIA – to require the production of the material over which privilege was claimed by way of an information notice under section 51.

The tribunal found that the commissioner could require the production of the privileged information for this purpose. It reiterated that the privilege exemption in section 42 is subject to a "public interest test": if the balance of public interest falls in favour of disclosure, then privileged information must be disclosed.

The tribunal noted that any other interpretation would "make a public authority the sole arbiter of its own compliance with FOIA insofar as it considered that any requested information involves LPP Material", which could not have been the intention of Parliament.

The iniquity exception

Will we see more challenges to privilege in future? Early in 2024, in Al Sadeq v Dechert and others, the Court of Appeal clarified the test for when the "iniquity exception" will operate to prevent a document that would otherwise attract privilege from doing so. The term "iniquity" encompasses – but is not limited to – fraudulent or criminal conduct. The court held that, where an iniquity is proven on the balance of probabilities, there can be no privilege in documents brought into existence as part of or in furtherance of that iniquity. 

This represents a move away from previous iterations of the test, which have suggested that there must be a "strong" or "very strong" prima facie case of iniquity before the exception can apply. The new formulation could potentially lead to more challenges to privilege on the basis of the iniquity exception – in particular, in civil fraud cases where the exception is most likely to be engaged.

Another important aspect of the Court of Appeal's decision was the clarification that litigation privilege is capable of applying with regard to actual or contemplated litigation, even where the party asserting privilege is not, and does not expect to become a party to that litigation.

Finally, the court provided some comfort as to the applicability of legal advice privilege in the context of a lawyer-run investigation. Questions are sometimes raised as to whether legal advice privilege can apply to lawyer "work product": where the lawyer in question is conducting a fact find, as opposed to – or in addition to – providing legal advice. Here, however, the court confirmed that investigatory work carried out by a lawyer, who has been engaged to bring their lawyers' skills to the investigatory process and to conduct it through lawyers' eyes, can be protected.

Osborne Clarke comment

Legal professional privilege remains a fundamental right and a bedrock of the justice system in this jurisdiction. However, 2024 brought an audit and clarification of rules, conventions and "umbrella terms" that over time have taken on a wider significance than originally intended.

Calls for the expansion of privilege for the purposes of encouraging ADR have also been rejected, though the same protections that could be provided by the proposed "mediation privilege" could also be achieved by way of a well-drafted mediation agreement.

What the year brings remains to be seen, but companies and their shareholders through 2025 will certainly be keeping a keen eye on the Supreme Court's view of the dismantling of the "shareholder principle".