You can’t see that – it is privileged!

23 September, 2014

In a shareholder dispute, shareholders will often be taking action in relation to steps taken by a company (under the control of wrongdoing majority shareholders) that are subject to the advice of lawyers.  This advice from lawyers is on the face of it covered by legal professional privilege.  What this means is that the wrongdoing shareholders / the company can argue that the claimant shareholders are not entitled to see such advice or surrounding communications.  However, claimant shareholders should not allow themselves to be fobbed off with such arguments.

 

Legal professional privilege (LLP) is an important right granted in the public interest.  In very simple terms it allows a party to litigation to refuse to let another party see the legal advice they have received or other communications with their lawyer.  This allows people to have full and proper discussions with their lawyer without fear that this might have to be revealed and possibly used against them in litigation.

 

In the example referred to at the beginning, the advice is being received by the company.  Accordingly the company, which is a nominal party to the proceedings, is entitled to assert LPP and say that the claimant shareholders cannot see the advice.   Given that the wrongdoing solicitors in charge of the company will have seen the advice this seems inherently unfair.  The court has recognised this and in a series of cases, most recently confirmed in 2014, has held that this is one of the limited exceptions to the general rule and such documentation and advice may have to be disclosed.

 

The moral in this story, for majority shareholders, is that they must be wary of what they say to lawyers acting for the company in taking steps which might be challenged by other shareholders.  They cannot simply rely on LPP to protect what is said.

 

Reviewed in 2015