SCA applies dominant purpose test against Steinhoff 'litigation privilege' argument

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This decision emphasises that documents created with the primary intention of obtaining legal advice or for use in litigation are protected by privilege. However, in the case of Steinhoff (now Ibex), the SCA found that the dominant purpose behind the forensic report was to investigate accounting irregularities, not for litigation, thus it was not privileged.

The Supreme Court of Appeal (SCA) has adopted the dominant purpose test to determine whether a document or communication prepared by a third party was provided for the purpose of existing or contemplated litigation and accordingly protected from disclosure by litigation privilege.

Steinhoff's forensic investigation report

Following the collapse of Steinhoff and a forensic investigation into the cause of its demise, two South African media houses sought the disclosure of the forensic investigation report prepared by PwC.

PwC was briefed by Steinhoff to investigate the alleged accounting irregularities and its non-compliance with laws and regulations to enable it to finalise its annual financial statements. On conclusion of the investigation, PwC provided Steinhoff with a comprehensive report of its findings.

On 15 March 2019, Steinhoff elected to publish an 11-page overview of the report. The media houses requested disclosure of the report as it is a matter of public importance and in the public interest. Steinhoff refused to disclose the report to the media houses, asserting that the report was protected from disclosure by litigation privilege.

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SCA ruling

On 4 December 2024, the SCA delivered its judgment in the matter of Ibex RSA Holdco Ltd and Another v Tiso Blackstar Group (Pty) Ltd and Others [2024]. The SCA upheld the High Court’s order, finding that the objective evidence such as the SENS announcement and PwC’s engagement letter did not support Steinhoff’s assertion that the purpose of the report was to obtain legal advice or for use in contemplated litigation.

There are two requirements for litigation privilege:

1. the document must have been obtained or brought into existence for the purpose of a litigant’s submission to its legal adviser for legal advice; and
2. litigation must have been pending or contemplated as likely at the time.

The SCA went on to consider whether the test to determine if a document that is brought into existence for different purposes, only one of which is to obtain legal advice for pending or contemplated litigation, is protected by legal professional privilege. This issue has not previously been decided by the SCA.

International case law

The ‘one of many purposes’ approach adopted in A Sweidan and King (Pty) Ltd and Others v Zim Israel Navigation CO Ltd 1986 (Sweidan) differs from the dominant purpose approach followed in England, Canada, New Zealand and Ireland.

After considering leading judgments in the UK and Australia, the SCA concluded that the ‘sole purpose’ test is too restrictive and the ‘one of many purposes’ approach clothes documentation that has come into existence to give corporate bodies information about what its agents have done with protection it would not otherwise be entitled to.

If the party was an individual not acting through employees or agents, it would be precisely that knowledge and information that would be discoverable and the party cannot be better off by being a corporation.

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Dominant purpose test

The SCA therefore favoured the dominant purpose test as it 'advances the adversarial system of justice by broadening the discovery process, thus ensuring that the courts decide issues between parties on an evaluation of the full facts. The former approach clothes documents that would in any event have been produced and otherwise not privileged, with legal professional privilege; and is at odds with the object of discovery.'

The SCA went on to state that the proper test in South Africa is as follows:

A document created with the dominant purpose of its author, or of the person or authority under whose direction it was created, of using it to obtain legal advice, or in the conduct of existing or contemplated adversarial litigation, is privileged and shielded from inspection and production. Consequently, the decision in Sweidan is overruled and should not be followed.

Accordingly, the Court concluded that the report was not privileged as its dominant purpose was to investigate accounting irregularities in order to finalise Steinhoff’s financial statements, not to provide legal advice for contemplated litigation.

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Implied waiver

Even if the report was privileged, did Steinhoff waive privilege by publishing the overview of the report?

Waiver may be express or implied. The test for implied waiver is objective – where the conduct of the person concerned is inconsistent with the intention to maintain confidentiality and, if allowed, it will unfairly impede the opponent’s ability to respond to the case or defence based on the privileged material. This can occur notwithstanding any express reservation of the right to invoke privilege.

The Court held that although it may not have been Steinhoff’s intention to waive privilege, its conduct in publishing the detailed 11-page summary of the report amounted to an implied waiver of privilege. Consequently, fairness and consistency dictate that the media is entitled to disclosure of the full report.

Unless Steinhoff (now Ibex) appeals the judgment of the SCA to the Constitutional Court, it must disclose the full PwC forensic report to the media houses that requested it.