Court limits legal privilege in favour of media rights to freedom of expression

Investigation reports compiled by law firms, accountants or forensic specialists for large companies are usually highly confidential, but they are also sought after by media outlets seeking access to information they believe to be in the public interest.

A potentially landmark high court decision, Tiso Blackstar Group & Others v Steinhoff International Holdings, dealt with an instance where two media houses sought access to an investigation report compiled by Pricewaterhouse Coopers (PwC) regarding alleged accounting irregularities at Steinhoff International Holdings. Tiso Blackstar was the predecessor of Arena Holdings, which owns Business Day.

Reputational risk and exposure are of paramount importance to corporates, and the protection afforded by the principle of legal privilege is usually the comfort relied upon by organisations facing scandals, where law firms or forensics firms are engaged to conduct sensitive investigations. The decision in the Tiso Blackstar case threatens to disrupt the long-standing reliance on legal privilege as a panacea that will prevent dirty laundry being aired in the public domain.

The media outlets became aware of the existence of the report through a Stock Exchange News Service announcement issued by Steinhoff, which mentioned PwCs appointment and mandate to investigate. Following this, two requests for the report were submitted by the media houses in terms of the Promotion of Access to Information Act.

The high court held that the right to freedom of expression (which includes the right to a free press) was a right on which the media outlets could legitimately found a Promotion of Access to Information Act request. Steinhoff's argument that the media houses were able to exercise the right to freedom of expression using publicly available information (that is, without the report) was dismissed, with the court noting that the information in the public domain was clearly incomplete.

However, the nub of the debate centred on whether Steinhoff could claim legal privilege over the report. There are two types of legal privilege in SA, legal advice privilege, which covers confidential communications between a client and legal adviser for the purposes of giving or receiving legal advice; and litigation privilege, which covers confidential communications between a client, a legal adviser and/or third parties in respect of contemplated (probable) or pending (current) litigation. 

In Tiso Blackstar the court dismissed Steinhoff’s argument that PwC’s investigation report was covered by litigation privilege because PwC was appointed to investigate the accounting irregularities by Steinhoff’s attorneys (acting on Steinhoff’s instructions), and that the report was commissioned so that it could be submitted to Steinhoff’s attorneys to enable them to advise on the litigation that was being contemplated at the time.

It held that the imposition of Steinhoff’s attorneys into the relationship between PWC and Steinhoff was not sufficient to establish privilege, and the fact that PWC’s engagement letter referred to contemplated litigation did not assist in Steinhoff’s privilege claim. The high court therefore set aside Steinhoff’s refusal of the Promotion of Access to Information Act requests and ordered the company to deliver the report to the media outlets within 10 days of the order. 

Litigation privilege will cover engagements between a client or attorney and third parties (such as PwC) related to pending or contemplated litigation. The judgment in Tiso Blackstar does not change this position. The issue in Tiso Blackstar was that Steinhoff did not establish, on the facts, that the engagement with PwC related to contemplated litigation.

The question may then arise whether Steinhoff might have been able to successfully rely on legal advice privilege (rather than litigation privilege). The issue of legal advice privilege over documents provided by third parties (such as PwC’s report) has not been squarely addressed by the SA courts. However, the Tiso Blackstar judgment indicates that SA companies need to be wary of relying on privilege.

They need to bear in mind that even where a client’s attorney is interposed in the relationship with a third party performing investigation functions (accountants or forensic specialists, for instance), this does not guarantee that the third party’s work will be covered by legal privilege (in the form of litigation or legal advice privilege).

Furthermore, where a company (through its attorneys or directly) engages a third party to assist with an investigation the company must form a clear and precise understanding of its purpose in engaging them. If the purpose is the submission of information to attorneys for use in pending or contemplated litigation this will be covered by litigation privilege, but the company should clarify and record this purpose internally and (where necessary) externally.

If the purpose is the submission of information to attorneys for legal advice, it is unclear whether legal advice privilege will apply in SA. The company should, regardless, also clarify and record this purpose. 

Finally, all Promotion of Access to Information Act requests received by private companies should be considered carefully. Where a request is refused, a detailed explanation of the refusal and the grounds therefore should be provided. A short or incomplete account of the reasons for refusal can limit one’s ability to raise other grounds of refusal should the Promotion of Access to Information Act requester take the request to court.

With the intense focus by the SA government, media and public interest groups on corruption and the role of corporates in state capture, this will not be the last attack on a corporate entity’s claim to privilege.

Steinhoff has announced that it is appealing against the Tiso Blackstar decision, so while it may be an initial win for the media, the saga is far from over — there will be continued scrutiny and analysis of how far the courts are willing to go when weighing up a claim of legal privilege against the right to journalistic freedom of expression.

• Dunstan-Smith is partner and Grieve associate, at law firm Herbert Smith Freehills.