Privilege under microscope

Corporate lawyers advising even the largest listed companies could forfeit legal professional privilege when minority shareholder interests might be prejudiced, a Chancery judge concluded last month.

The decision in CAS (nominees) & another v Nottingham Forest Plc and others is thought to be the first to deal with the extent to which legal professional privilege could be claimed by a listed company following an application under s.459 of the Companies Act 1985, which deals with minority shareholder interests.

The case arose after a supporter sought to inject cash directly into the club.

Two shareholders seeking details of the deal made the application.

When minority shareholders argue that their interests have been prejudiced, it has previously been held in relation to small, private companies with limited shareholdings that privilege does not apply.

Mr Justice Evans-Lombe ruled that there was nothing to support the contention that established case law should be 'differently applied depending on the size and importance of the company'.

Alex Gordon, the litigation partner at City firm Berwin Leighton, which represented Nottingham Forest, said that any advice which could concern shareholder's rights, given even in the heat of transactions could be opened to later review - no matter what the size of the company.

The claimants' solicitor, Peter Sigler, head of litigation at Nabarro Nathanson, said corporate lawyers should be 'wary of shareholder's rights'.

He added: 'Solicitors should conceive that what they say between themselves and counsel and between themselves and the board may not be protected by legal professional privilege.'

Sue Allen