In the recent, and as yet unreported, decision of UAP Agrochemicals KZN (Pty) Ltd & another v Nefic Estates (Pty) Ltd Case no: AR515/11, by the full bench of the KwaZulu-Natal High Court in Pietermaritzburg, the appellant succeeded in maintaining its privilege over certain expert and loss adjuster's reports.
Background
Nefic Estates (Pty) Ltd, the plaintiff in the matter, had brought an application for disclosure of documents over which the defendants had claimed privilege. The application was brought on two grounds, namely that:
- the reports had been prepared prior to litigation being contemplated; and
- there had been an agreement between the parties that four expert reports would be given by the defendants to the plaintiff.
The plaintiff succeeded with its application on the first ground
and the court of first instance ordered the defendants to disclose
all "privileged" documents to the plaintiff, including
the documents brought into existence after the appointment of the
defendants' attorneys of record. The defendants took the matter
on appeal.
The Appeal
In the judgment, handed down by Mokgohloa J, the Appeal Court considered three issues, namely:
- the appealability of the order of the court of first instance;
- whether the reports were in fact privileged; and
- whether there had been an agreement between the parties to provide certain reports as alleged.
Appealability
While the question of appealability makes for interesting reading,
the conclusion of Mokgohloa J was based on the judgment in
Macsand CC v Macassar Land Claims Committee and others
[2005] ALL SA 469 (SCA).
This judgment stated that in determining whether a decision is
appealable, both the form of the order and, predominately, its
effect must be considered. Mokgohloa J agreed that once the
documents over which the defendants claimed privilege had been
handed over to the plaintiff, the contents would become known to
the plaintiff and there is nothing that can be done to extract that
knowledge from the mind of the plaintiff. Consequently, the
judgment is appealable.
Privilege
On the more important aspect of privilege, Mokgohloa J firstly
relied on the judgment in United Tobacco Companies (South) Ltd
v International Tobacco Co (SA) Ltd 1953 (1) SA 66 (T) at 67E,
where the Court required a likelihood of litigation, and not a mere
possibility. Mokgohloa J also relied on General Accident, Fire
and Life Assurance Corporation Ltd v Goldberg 1912 TPD 494,
wherein the Court stated that privilege could attach to statements
from agents only if litigation was "likely or
probable".
The plaintiff did not dispute the defendants' submission that
they appointed their attorney of record on 28 May 2004, at a time
when they reasonably contemplated the likelihood of litigation.
Mokgohloa J was therefore satisfied that the order of the court of
first instance to compel the defendants to discover such documents
was wrong. He found that all of the documents created after the
appointment of the attorneys of record for the defendants were
privileged as they had been created as part of the exercise of
gathering information to enable the attorney to provide legal
advice.
The status of the documents created between the date of loss and
the appointment of the attorneys, a period of approximately six
months, also needed to be considered.
In arriving at its decision, the Court considered and accepted the
facts set out by the defendants regarding the nature and extent of
the damage and the reporting of those facts to their insurer.
The plaintiff argued that an insurer cannot claim privilege in
respect of documents obtained prior to it agreeing that the claims
might be subject to indemnification under the policies. Mokgohloa J
did not deal with this argument in any detail, but stated that he
was satisfied that, objectively, there were clear indications of
the likelihood of litigation from the date of loss, stating,
"The insurance company assessed the risk of litigation and
concluded that it was likely."
Mokgohloa J therefore found that the reports were commissioned in
contemplation of litigation.
The Agreement
The finding of privilege could have been defeated by the
plaintiff's allegation of an agreement between the parties that
the defendants would provide copies of certain reports to it.
The defendants denied the existence of an agreement. In support of
its allegation, the plaintiff provided a number of affidavits by
various people, but the versions were inconsistent. In addition,
the correspondence exchanged at the time did not support the
plaintiff's version.
Mokgohloa J stated that a party who alleges that there was a
meeting and that certain disclosures were made at that meeting,
must state the date and place of the meeting and what was agreed in
that meeting. The plaintiff was unable to do this. Mokgohloa J
therefore concluded that the defendants' version, which was
supported by the correspondence, was more probable in the
circumstances and that the plaintiff had failed to show that there
was an agreement between the parties.
Conclusion
The plaintiff's application for disclosure of the privilege
documents was dismissed with costs.
The judgment highlights the importance of ensuring that privilege
is maintained over documents at all stages. In this particular
case, the defendants had reported the claim to their insurers, who
had in turn appointed a loss adjuster to investigate the
circumstances of the event.
This was done prior to the insurers having made a decision on
whether or not the policy would indemnify the defendants. Experts
were also appointed and they prepared reports on the likely cause
of the loss. All of this occurred prior to the appointment of the
attorneys six months later. The late appointment of the attorneys
in the matter put into question the validity of the defendants'
claim of privilege over the experts' and loss adjuster's
reports.
Although the Court in its conclusion found that the insurance
company had considered litigation to be likely, this is merely
supportive of a contemplation of litigation by the defendants
themselves.
Insurers would be well advised to give serious consideration to
whether or not litigation is contemplated prior to instructing loss
adjusters or experts to provide reports in any matter. If
litigation is indeed contemplated, and this is appropriately
documented, this would go a long way to showing that such
contemplation existed.
The less complicated solution remains to appoint attorneys at an
earlier stage and to have them instruct the loss adjusters and
experts, thereby ensuring that privilege is maintained.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.