DISCLOSURE OF THE COMPANY'S PRIVILEGED DOCUMENTS TO SHAREHOLDERS AS AN APPLICATION OF JOINT INTEREST PRIVILEGE
| Citation | (2020) 32 SAcLJ 36 |
| Author | KIU Yan Yu1 LLB (Hons) (National University of Singapore); Advocate and Solicitor (Singapore); Research Assistant, EW Barker Centre for Law & Business, National University of Singapore. |
| Published date | 01 December 2020 |
| Date | 01 December 2020 |
Operation and Justifications
Joint interest privilege is one of the exceptions to legal professional privilege, allowing privileged materials to be disclosed through discovery and inspection. Of the relationships that give rise to a joint interest, the company–shareholder relationship is perhaps of the greatest interest. While recognised under English law, US and Canadian laws have reached different conclusions on whether shareholders should be allowed access to the company's privileged materials. This article aims to highlight some of the issues concerning the operation and justifications of the company–shareholder joint interest relationship, and takes the position that this joint interest relationship is ultimately unjustifiable.
1 The necessity of legal professional privilege to secure the effective administration of justice is well established,2 and it has also been described as a “fundamental human right” and a “basic tenet of the common law”.3 Consequently, every ground that permits privilege to be overridden ought to be justified by cogent reasoning.4
2 This article is concerned with a particular relationship that allows privilege to be overridden under English law: the company–shareholder relationship. Joint interest privilege is automatically established in such a relationship, and consequently the company cannot resist disclosure against a shareholder on the grounds of legal professional privilege unless specific exceptions apply.5 However, not all common law jurisdictions take this approach. In many US states, shareholders must show good cause before they are allowed to override the company's privilege, whereas shareholders in Canada enjoy no additional advantage in accessing the company's privileged materials.6 The issue remains open in other jurisdictions, including Australia and Singapore.7
3 The purpose of this article is twofold. First, how the company–shareholder joint interest operates under English law, and the difficulties in that regard, will be discussed. Second, the justifications for such a joint interest will be examined, with this article taking the position that the joint interest should not exist.
4 Most of the discussion focuses on English law, but where relevant Singapore materials will be cited to show that the principles referred to are equally applicable locally. Significant differences in US evidence and company law make any direct comparison difficult,8 but cases and
5 It is necessary to first define the terms used in this article. According to The Law of Privilege, joint interest privilege is one of two forms of joint privilege, the other being joint retainer privilege.9 Both forms of joint privilege have broadly the same effects, the most important of which is that the parties to the joint privilege cannot assert privilege against each other, but each can assert privilege against the rest of the world.10 Thus, joint privilege can be seen as both a “sword” which negatives an assertion of privilege by other joint privilege holders, and a “shield” that protects all materials subject to the joint privilege from disclosure to the rest of the word. The “sword” aspect is the focus of this article.
6 A related form of privilege often discussed alongside joint privilege is common interest privilege.11 Where a privilege holder shares a common interest with another party in relation to the privileged material, the privileged material can be voluntarily shared between them, and both parties can assert privilege to resist disclosure against the rest of the world.12 Thus, common interest privilege acts as a “shield” that protects the privileged material from disclosure. Critically, common interest privilege does not act as a “sword”: if the holder of privilege chooses not to disclose the material in question, the holder's assertion of privilege cannot be overridden by the common interest.13
7 Sometimes, the cases also use “common interest” in its literal sense, ie, the interests of the parties are aligned. A good example can be seen in Commercial Union Assurance Co v Mander:14
[I]t is not enough that the person seeking disclosure of confidential documents can show that he has an interest in the subject matter which would be sufficient to give rise to common interest privilege if the documents had been disclosed to him; he must be able to establish a right to obtain access to them by reason of a common interest in their subject matter which existed at the time the advice was sought or the documents were obtained. [emphasis added]
Here, the first reference to “common interest privilege” is a reference to the technical concept of common interest, whereas the second reference to “common interest” refers to an alignment of interest with respect to the subject matter. To reduce confusion, common interest in the literal sense will be referred to as an alignment of interests.
8 Another point to note from the quoted passage is that an alignment of interests is being used to justify disclosure of privileged materials,15 such disclosure reflecting the existence of a joint interest as defined above. Whether that justification is correct will be discussed later,16 but an important consequence is that joint interest cases often focus their discussion on whether the parties' interests are aligned, and the phrase “joint interest” is not mentioned at all.17 The terminology of joint interest is largely an invention of academics to make the discussion clearer, and has yet to be widely adopted by the case law.
9 Thus, it has been noted that a difficulty which befuddles this area of the law is that the key terminology mentioned has been used inconsistently and interchangeably in cases and textbooks.18 The definitions adopted here will not apply to other materials,19 and care must
10 An appreciation and evaluation of the company–shareholder joint interest must necessarily start with its operation, and the difficulties in that regard.
11 Like other forms of joint interest privilege, the company–shareholder joint interest relationship is not an independent right to disclosure of the company's privileged materials.23 Instead, the right to disclosure is to be found in the discovery provisions of the English Civil Procedure Rules 199824 (“CPR”),25 or the Rules of Court26 (“ROC”) in the case of Singapore.27 What joint interest privilege does is to prevent the privilege holder from asserting privilege to avoid disclosure.28
12 This means that the company–shareholder joint interest relationship only offers practical utility when there is litigation between them, such that the CPR/ROC is applicable. The shareholder cannot normally compel disclosure of the privileged materials otherwise.29
13 While litigation is required for joint interest to have effect, there is no joint interest between the company and its shareholders in hostile litigation between them. As noted in Sharp v Blank:30
There is a general rule that no privilege can be asserted by the company against its shareholders. The general rule is subject to an exception where the advice taken by the company is in relation to litigation — that litigation being actual, threatened or in contemplation.
14 Thus, if the company obtains advice for an action against an ex-director and current shareholder concerning misappropriation of funds, the advice is privileged against the shareholder.31
15 It may seem that the practical utility of joint interest is eviscerated if it only operates during litigation but ceases to exist once there is hostile litigation, but that is not so for two reasons. First, even in hostile litigation no privilege can be asserted for advice obtained before the litigation was “actual, threatened or in contemplation”. This is because the issue of joint interest privilege is determined at the time the privileged material comes into existence, and not at the time privilege was asserted.32 Second, hostile litigation does not include litigation where the company is a nominal party. These are typically shareholder actions such as oppression where
16 Both will be discussed in more detail below, but it is convenient to note at this point that two consequences arise from this. First, joint interest is of greater importance to legal advice privilege than litigation privilege, since materials covered solely by the former are always disclosable, whereas materials covered by the latter would not be disclosable unless the company is a nominal party.33 Second, since the company is typically a nominal party in shareholder actions, joint interest is critical in such actions by allowing all relevant privileged materials to be disclosable.
17 Since joint interest cannot be asserted for privileged materials once hostile litigation is “actual, threatened or in contemplation”, the question of when that occurs is of critical importance. The main issue is when litigation is “in contemplation”, which is a rather amorphous concept. It appears that this requirement is analogous to proving that litigation was reasonably contemplated (as opposed to being a mere possibility) when claiming litigation privilege,34 even though the cases have not drawn this link.
18 This...
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