19 May 2025
| Business Law | Maritime Law and Insurance | Insurance Law
The Supreme Court Appeal of South Africa (SCA) recently delivered a seminal judgment on the issue of legal privilege which is likely to have ramifications in respect of the circumstances in which insurers may be entitled to claim privilege over survey reports.
Ibex RSA HoldCo
The case in question is Ibex RSA HoldCo Limited and Another v Tiso Blackstar Group (Pty) Ltd and Others (case no.: 862/2022) [2024] ZA SCA166 (Ibex RSA), where the central issue was the right of access by the media and the public in terms of the Promotion of Access to Information Act 2 of 2000 (PAIA), to a report prepared by PricewaterhouseCoopers Advisory Services (Pty) Ltd (PwC) following a forensic investigation into fraud and accounting irregularities within Steinhoff International Holdings NV (Steinhoff).
The factual matrix in Ibex RSA was, briefly, that PwC was appointed to conduct its investigation on 7 December 2017, following the decision taken by Deloitte, Steinhoff’s external auditors in the Netherlands, refusing to sign off on the company’s financial statements as a result of serious accounting irregularities. PwC’s mandate was to investigate the potential accounting irregularities within Steinhoff, including its apparent non-compliance with laws and regulations, and to furnish Steinhoff with an independent report detailing its assessment of the matter. Following the investigation, PwC furnished Steinhoff with a detailed report of its findings which comprised some 4,000 pages, including 3,000 pages of annexures.
The media group, Tiso Blackstar, requested access to the report through the relevant provisions of PAIA contending that access to the report was crucial to the right of freedom of expression of the media. In response, Steinhoff refused access to the report contending that it was legally privileged as contemplated in section 67 of PAIA. Through its attorneys, Steinhoff argued that the report was privileged as follows:
“On the basis, directly, of providing legal advice to our client in contemplation of litigation on behalf of our client against a number of individuals both juristic and natural as well as to defend threatened claims against our client.”
In the circumstances, one of the issues to be determined in the appeal was whether Steinhoff had established legal privilege as a ground for refusal of access to the report as contemplated in section 67 of PAIA. Steinhoff asserted litigation privilege, in respect of which there are two well-established requirements, namely:
i) the document must have been obtained or brought into existence for the purpose of the litigant’s submission to a legal advisor for legal advice; and
ii) litigation must have been pending or contemplated as likely at the time.
These requirements have previously been set out in the judgment of the SCA in Competition Commission of South Africa v Arcelormittal South Africa Ltd and Others 2013(5) SCA 538.
In addressing the issue in Ibex RSA, the SCA had to consider the applicable test relating to legal professional privilege, which it had not previously decided. The SCA noted that there are two approaches to the applicable test.
The first approach is that adopted in A Sweidan & King (Pty) Ltd & Others v Zim Israel Navigation Co Ltd (1986) (1) SA 515 (D) (Sweidan), where the High Court in Durban held that a document would be privileged if litigation was pending or thought likely and if one purpose for which the document was made was submission to a legal advisor to enable the preparation of legal advice.
The second approach is that in order for privilege to attach, the document must have been brought into existence for the dominant purpose of obtaining legal advice or for use in the conduct of existing or contemplated litigation.
Noting that there were sound reasons for following the dominant purpose test, as set out by the House of Lords in England in Waugh v British Railways [1980] AC 520, the SCA held that the dominant purpose test is the proper test under South African law, and summarised it as follows:
“A document created with the dominant purpose of its author, or of the other 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. Consequentially, the decision in Sweidan is overruled and should not be followed.”
Applying that test to the facts before it in Ibex RSA, the SCA held that the dominant purpose of procuring the PwC report was the investigation of accounting irregularities within Steinhoff with a view to finalising the consolidated financial statements of the Steinhoff Group for the 2017 and 2018 financial years. The SCA accordingly held that the claim to privilege by Ibex RSA was unsustainable in the circumstances, and that the defence to its release under section 67 of PAIA must fail.
On a related issue, the SCA found that when Steinhoff published an overview of the report on 15 March 2019 and released it to the public, it impliedly waived privilege in relation to the full report.
Chard
It is worth again reflecting on the judgment of Lopes J delivered in the Durban High Court on 30 September 2019, relating to an application by an insured, Mr Chard (Chard) in terms of Rule 35(6) of the Uniform Rules of Court for an order compelling disclosure of the reports of the insurer’s surveyor, the insurer’s internal investigator and the report of a mechanical engineer prepared at the instance of the insurer.
In Chard, applying the Sweidan test, Lopes J held that the insurer’s claim to privilege was unsustainable and he ordered the insurer to disclose the reports of the surveyor, including letters and emails exchanged between the surveyor and the claims handler of the insurer, together with the reports of the internal investigator of the insurer and the mechanical engineer.
Summary
The judgment of the Supreme Court of Appeal in Ibex RSA is undoubtedly going to make it more difficult for insurers to claim privilege in respect of survey reports. The dominant purpose test is a stricter test than the test which prevailed under Sweidan.
Insureds and third parties who may seek access to the contents of survey reports are likely to contend that there are numerous purposes attached to the preparation of a survey report – for example, reporting on investigations conducted to ascertain the facts and circumstances of a loss and the potential quantum thereof and to determine whether the claim is one which is covered under the relevant insurance policy and to determine whether there are potential recovery claims against third parties, in the event that insurers wish to pursue such claims under subrogated rights – and that the dominant purpose is not to obtain legal advice in pending or contemplated litigation.
The upshot of this is that both insurers and surveyors need to prepare themselves for a world in which they may be compelled to disclose the contents of, at the very least, preliminary survey reports prepared following initial investigations undertaken by a surveyor, to the insured and third parties.
The Insurance Team at Cox Yeats has given this issue careful consideration and has recommendations on how insurers and surveyors should approach the preparation and receipt of survey reports, which may improve the prospects of successfully claiming privilege over a survey report in any ensuing litigation. For further information on this topic, please contact our Insurance Team.
