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

Such seemingly incompatible perspectives - where one side wishes to use legal privilege to prevent dirty laundry from being aired in public and the other seeks to hang it on the washing line for all to see - have recently been placed under the spotlight.

Following developments in the UK courts in recent years, the South African courts have been called upon to consider the extent to which investigation reports are protected by legal privilege in the context of litigation and regulatory proceedings. Yet, in a potentially landmark decision the South African High Court has now considered the issue in 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 N.V ('Steinhoff').

Of course, reputational risk and exposure is of paramount importance to corporates and the protection afforded by the principle of legal privilege is usually the comfort relied upon by organisations facing corporate scandals when law firms or forensics analysts are engaged to conduct sensitive investigations. Against this backdrop, the decision in Tiso Blackstar Group (Pty) Ltd and others v Steinhoff International Holdings N. ('Tiso Blackstar') threatens to disrupt the long-standing reliance in South Africa on legal privilege as a panacea that will prevent private materials from being opened up to public scrutiny and exposure. The judgment may also have implications for UK practitioners. Firstly, foreign law (including South African law) can rely on the interpretation and development of legal principles in the UK. Secondly, the judgment may have direct implications for multi-national companies with South African operations - for example, the myriad of multi-national companies implicated in the reports from South Africa's Judicial Commission of Inquiry into State Capture.

To put this into context, the media outlets at the centre of this case became aware of the existence of the report through a SENS announcement issued by Steinhoff mentioning PWC's appointment and mandate to investigate. They subsequently submitted two requests to access the report in terms of South Africa's Promotion of Access to Information Act, 2000 ('PAIA'), which is the primary legislative mechanism available to interested parties when seeking access to information held by another party.

It is worth noting that in terms of PAIA, access to records held by a private body provided are permissible providing three criteria are met. To begin with, it must be clear that the person requires the record in order to exercise or protect a right they have and which they must identify. They must also ensure to follow the correct procedure in requesting the record and what they are seeking must not be covered by a ground of refusal set out in PAIA.

The High Court held that the right to freedom of expression - which naturally includes the right to a free press - was a right on which the media outlets could legitimately find a PAIA request. Steinhoff's argument that the media houses were able to exercise the right to freedom of expression using publicly available information (ie without the report) was dismissed, with the court noting that the information in the public domain was clearly incomplete.

Put another way, the question of whether the media's right to freedom of expression outweighs a company's right to privacy has been challenged. Quite clearly, the nub of the debate centres around whether Steinhoff could claim legal privilege over the report.

Litigation privilege

In Tiso Blackstar, Steinhoff specifically argued that PWC's investigation report was covered by litigation privilege because was appointed to investigate the accounting irregularities by Steinhoff's attorneys (acting on Steinhoff's instructions); and because the report was commissioned so it could be submitted to Steinhoff's attorneys to enable them to advise on litigation which was contemplated at the time.

So, it is interesting that the High Court 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 Steinhoff's privilege claim. The engagement letter, in the court's view, demonstrated PWC's intentions and PWC's intentions were irrelevant to Steinhoff's intentions and claim to privilege.

In terms of Steinhoff's intentions, the court had access to two documents, the SENS announcement about PWC's appointment and the affidavit filed by Steinhoff in the proceedings.

The SENS announcement, the court found, did not refer to any contemplated litigation being the reason for PWC's appointment. In respect of the affidavit, the court noted that whilst Steinhoff's affidavit restated the requirements for privilege, it did not actually set out the facts which would support a claim for privilege - for example, it did not provide details on the litigation contemplated, who the claimants or defendants may be, or how likely litigation was.

The High Court, therefore, set aside Steinhoff's refusal of the PAIA requests and ordered Steinhoff to deliver the report to the media outlets within 10 days of the order.

It has long been accepted that litigation privilege will cover engagements between a client or attorney and third parties related to pending or contemplated litigation. To be clear, the judgment in Tiso Blackstar does not change this position. The issue in Tiso Blackstar was that, in the High Court's view, Steinhoff did not establish, on the facts, that the engagement with PWC related to contemplated litigation - the court viewed that the purpose of PWC's engagement was something other than contemplated litigation.

This is by no means the end of the story as the issue of the application of litigation privilege to accounts' investigation reports was also considered by the UK High Court in the summer of 2021 in State of Qatar v Banque Havilland SA and Others [2021] EWHC 2172 (Comm) ("Banque Haviland"). In this case, the State of Qatar sought disclosure of a forensic investigation report produced by PWC, which had been instructed by Banque Haviland (the 'Bank'), through the Bank's lawyers, into claims relating to a former employee's involvement with trading and public relations strategies aimed at causing financial damage to Qatar in 2017.

The Bank had sought to withhold production of the report and supporting documents or to redact them, on the grounds of litigation privilege. Still, the UK High Court held that litigation privilege did not apply.

Although the decision does not establish new principles relating to litigation privilege, it does highlight the difficulties in seeking to withhold or redact an investigation report and associated documents on the basis of litigation privilege where there is little evidence at the time the report was commissioned that adversarial proceedings were, or were regarded by the Bank to be, reasonably in contemplation and where the sole or dominant purpose in commissioning the report was conducting, settling or avoiding litigation. However, the decision also appears to indicate that where an investigation report is found to be protected by privilege and has been provided to a regulator on a limited waiver basis, the courts will robustly resist any claims that privilege has been waived.

Legal advice privilege

In the context of Tiso Blackstar, it is also worth pausing to consider the question of 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 (in this case, PWC's report) has - in our view - not been squarely addressed by a South African court but courts in other jurisdictions have certainly provided rulings on the issue.

The English courts, for example, have grappled with the extent to which legal advice privilege can be applied. It is a longstanding principle of English law that third party communications are not covered by legal advice privilege. In Three Rivers Council v. The Governor and Company of the Bank of England (No 5) ('Three Rivers (No. 5)'), the Court of Appeal court noted that where a third party is an agent of the client, its communications with a legal advisor may be covered by legal advice privilege provided the other requirements of legal advice privilege are met. Under this approach, Steinhoff would need to prove that PWC was it or its attorney's agent for legal advice privilege to cover the report. We believe this would be exceptionally difficult- the UK Supreme Court has held that legal advice privilege cannot be claimed in respect of confidential communications between accountants and their clients for the purpose of requesting or providing legal advice and an argument in respect of agency was made in Price Waterhouse v BCCI Holdings (Luxembourg) SA, but was rejected.

In Australia, however, Pratt Holdings Pty Ltd v Commissioner of Taxation ('Pratt Holdings') established that there is not necessarily an agency requirement in Australian law and that legal advice privilege can cover communications exchanged with a third party provided that the dominant purpose of the communication was the provision or receipt of legal advice from a legal advisor. Under this approach, Steinhoff would merely need to prove that the dominant purpose of PWC's engagement was the provision/ receipt of legal advice for legal advice privilege to cover the report.

South African judgments around privilege have tended to follow the trends of English courts. That being said, Three Rivers (No. 5) is regarded by many as a controversial judgment and a South African court would obviously be empowered to follow the Australian position or chart a completely new course on the issue.

Key implications

Putting all of this together, legal practitioners from all jurisdictions should be aware that even where a client's attorney is interposed in the relationship with a third-party performing investigation functions, this will not guarantee that the third party's work will be covered by legal privilege.

The onus is also clearly on companies in any jurisdiction to form a clear and precise understanding of its purpose in engaging third-party assistance on investigations. This is, we believe, particularly important if the purpose is the submission of information to attorneys for use in pending or contemplated litigation. It will be covered by litigation privilege but the company should clarify and record this purpose internally and (where necessary) externally. Additionally, this matters if the purpose is the submission of information to attorneys for legal advice, though whether legal advice privilege will apply will vary from jurisdiction to jurisdiction. The company should, regardless, also clarify and record this purpose.

It is also important that all information requests made in terms of access to information legislation (such as PAIA in South Africa or the Freedom of Information Act, 2000 in the UK) received by entities 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 information requester take the request to court.

Ultimately, with the intense focus by the South African 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. This is also true on a global scale as attention focuses on corruption and the improper conduct by private companies,

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

For now, at least, washing lines should be at the ready as it remains possible that dirty washing may yet still be aired in public.

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.