BACKGROUND
Contango Trading SA, Natixis SA and Glencore Energy UK Limited (hereinafter referred to as “the Appellants”) brought an appeal against a decision of the Western Cape High Court, when the court dismissed two interlocutory applications which sought to compel Central Energy Fund SOC Limited (hereinafter referred to as “CEF”) and Strategic Fuel Fund Association (hereinafter referred as “SFF”) (i.e. respondents in the appeal), to discover documents following their refusal, when requested to do so in terms of Rule 35(12). CEF are the parent company of SFF. Three categories of documents were sought to be discovered in the appeal namely, a “legal review”, two reports by auditing companies namely KPMG and PWC and two legal opinions from senior counsel. All of the above documents were referred to in the Respondent’s founding affidavit.
The “Legal Review”
CEF and SFF resisted the production of the legal review on two grounds namely:
1. They alleged the review referred to a process and not a document as envisaged in Rule 35(12); and
2. The process was privileged.
It was alleged by the Appellants that the manner in which the review was referred to in the founding papers indicated that the legal review was, in fact, a document.
The KPMG and PWC Auditing Reports (“the Auditing Reports”)
The court a quo refused the production of the Auditing Reports on the grounds that same were protected from disclosure by litigation privilege. The Supreme Court of Appeal reiterated the requirements for litigation privilege which are:
1.The document must have been obtained or brought into existence for the purpose of a litigant’s submission to a legal advisor for legal advice; and
2. Litigation was pending or contemplated as likely at the time.
In the founding papers of CEF and SFF it was stated
“The reason for seeking a second opinion from senior counsel concerned the financial analysis the CEF received from KPMG. This financial analysis was sought for purposes of gaining a comprehensive understanding of the financial consequences for the CEF, SFF, and by implication, the fiscus, given the unlawful nature of the sale of the Oil Reserves.”
“KPMG issued its report on 25 July 2017 and the CEF accordingly instructed new senior counsel to consider the outcome of the legal review directed by the CEF in the light of the financial analysis it received from KPMG.”
“However, matters were further delayed following a series of compromising reports that related to allegations published on various media platforms, that one of KPMG’s employees had engaged in unethical conduct relating to services the auditing firm provided to a public entity. Subsequently, the CEF considered it prudent to seek a second financial analysis from Price Waterhouse Coopers (PwC). PWC’s report was provided on 7 November 2017.”
The SCA noted that the first report issued by KPMG was obtained subsequent to the first opinion received by senior counsel and was obtained for purposes of gaining a comprehensive understanding of the financial consequences for CEF and SFF as a result of the unlawful nature of the transaction. The court further noted that the second report, issued by PWC, was obtained for the same purpose.
CEF and SFF denied that the financial analysis, issued by KPMG, was a reference to a document and that the report was, in any event, privileged. It was further alleged that the PWC report was “legally privileged” and prepared in “contemplation of litigation”. The court observed that no “litigation privilege” was sought over the KPMG report but “legal privilege” was claimed over both reports. CEF and SFF later conceded that the reports were obtained in anticipation of litigation and were thus privileged on the basis of litigation privilege. No further factual basis was proffered for the aforementioned assertion.
The Two Legal Opinions (“the Opinions”)
CEF and SFF obtained the opinions from 2 senior counsel in relation to the Auditing Reports. The Appellants sought production of these documents and argued that, despite the fact the Opinions were privileged, the Respondent had waived such privilege. In doing so the Appellants relied on the following remarks made by the Respondents:
“Although the advice received from legal counsel is legally privileged and is not, I submit capable of discovery, given where we are now, suffice it to say that the senior advocates agreed with the outcome of the CEF legal review.” The Appellants argued that the outcome of the “legal review” had been set out broadly in the affidavit and its conclusion was that the disposal of the oil reserves did not comply with the conditions which had been imposed in a Ministerial Directive and further that there were indications that the aforementioned disposal did not comply with provisions of the Companies Act 71 of 2008 and the Public Finance Management Act 1 of 1999. The individual who deposed to the founding affidavit Mr Makasi further stated in the affidavit that insofar that he made legal submissions they are made on the advice of his legal representatives.
The Appellants argued that, as a result of the aforesaid, there had been a disclosure of the contents of the two opinions amounting to a waiver of the privilege that would otherwise be attached to same.
HELD
The “Legal Review”
The SCA, despite having reservations as to the manner in which the CEF and SFF dealt with the demand to produce the documents, agreed that the “legal review” referred to a process and not a specific document. The SCA found that the “legal review” was a process which would have generated a large number of documents and the Appellants expected the court to find, that the “legal review” referred to a specific document.
The SCA further found that for a request to fall within the ambit of Rule 35(12) there must be reference to a specific document and not a general category of documents. As such, the SCA held that this is not what is envisaged in Rule 35(12) and concluded that the mention of the legal review in the founding papers did not refer to a specific document.
The KPMG and PWC Auditing Reports (“the Auditing Reports”)
The SCA held that the mere assertion of legal privilege was, without any further argument, not sufficient to withhold the document. The SCA further held that, in our law, the purpose of such document needs to be considered in order to determine whether such document falls within the purview of litigation privilege. The court finally held that it the purpose for which the Auditing reports were obtained was to assess the financial implications of the possible termination of contracts. This did not bring the Auditing Reports within the scope of litigation privilege and thus had to be disclosed to the Appellants.
The Two Legal Opinions (“the Opinions”)
The SCA held that the legal advice provided in the opinions was protected by legal privilege but that such privilege can be waived. The court found that there had been no express waiver of privilege by CEF and SFF, however, the SCA needed to consider whether there was an implicit waiver, alternatively, that the waiver could be imputed. The SCA held firstly that waiver by imputation and waiver by implication are synonymous.
After an extensive consideration of local and foreign authorities, the court held that four things emerge that must be considered cumulatively when determining if privilege has been waived by implication:
1. There is no difference between implied waiver and a waiver by implication. They are terms which are referring to the same thing;
2. Such a waiver may be inferred by the objective conduct of a party claiming the privilege in disclosing part of the content or the gist of the material;
3.Whether the disclosure impacts upon the fairness of the legal process and whether the issues between the parties can be determined without reference to the material; and
4. There is no general overarching principle that privilege can be overridden on grounds of fairness alone. The rule “once privileged, always privileged” applies and only waiver can disturb it.
The court held that each case must be decided on its own facts but privilege was clearly asserted in the present matter. The court said that the reference to the opinions in CEF and SFF’s founding papers may have constituted a partial and limited disclosure of the conclusions reached in the opinions. To that extent, the court stated that there was conduct on the part of CEF and SFF that could, objectively speaking, be viewed as inconsistent with preserving the confidentiality of the opinions. However, on a consideration of the facts in totality, the court stated that there was a clear assertion of privilege. Accordingly, the SCA held that the opinions did not need to be provided.
VALUE
This decision serves to illustrate that reference to a process does not constitute reference to a document.
Further, where a party claims a document is protected by legal privilege or litigation privilege the party asserting such privilege must advance reasons as to why such a document complies with the requirements of privilege. A mere assertion that legal privilege applies is insufficient.
Finally, the SCA confirmed that there is no difference between implied waiver of privilege and a waiver by imputation.
Written by Shaun Piveteau and Jarrod Van Der Heever
