Company not ordered to disclose privileged documents to shareholders in context of late application in securities class action

In an oral judgment delivered at the end of a one-day hearing, the High Court has refused an application by the claimants in a securities class action for disclosure of privileged documents by the defendant company: Various Claimants v G4S PLC [2023] EWHC 2863 (Ch).

The decision considers the boundaries of the so-called “shareholder principle”, ie that a company cannot assert privilege against its shareholders unless the documents were produced for the dominant purpose of litigation between the company and its shareholders. The decision will be of particular interest to banks and listed issuers facing disclosure applications by claimants seeking to rely on the shareholder principle in order to obtain access to a wider pool of documents in securities class actions.

The judge noted that the principle had been recognised in many authorities, including the Court of Appeal’s decision in Woodhouse and Co (Ltd) v Woodhouse [1914] 30 TLR 559, and in Hollander on Documentary Evidence which states that the rule is so well established that it is now probably only the Supreme Court that could overturn it. Accordingly, the judge said, “as a lowly first instance judge, and even though I have my doubts as to the justification now for such a principle”, he could not say that the principle did not exist or should be got rid of.

Ultimately the judge declined to order disclosure on case management grounds, given the real practical difficulties caused by the lateness of the application and the fact that, on the judge’s conclusions, only a small proportion of the claimants would be entitled to see the defendant’s privileged documents. He considered that it would be impossible to manage a trial where privileged documents were deployed by certain claimants and could not be disclosed to others, particularly as the claimants had the same solicitors and counsel. And it was too close to trial to separate out the claimants into different trials to protect privilege.

He did however express his views on a number of points as to the application of the shareholder principle which are unclear in the case law, including that the principle should apply only to registered shareholders, rather those who hold shares through the CREST securities depository or the broad class of those with “interests in securities” sufficient to bring a securities class action under s.90A and Sch.10A of the Financial Services and Markets Act 2000 (FSMA).

For more information, please see our Litigation blog post.

Note: In January 2024, the parties reached a settlement in the case.