Contango Trading SA v Central Energy Fund SOC Ltd

Legal advice privilege considered and to the extent there was conduct that could objectively speaking be viewed as inconsistent with preserving in full the confidentiality of the opinions it had to be seen in the light of a claim that the opinions were privileged.

Essence

Legal advice privilege was not waived and there was no question of relying on some undisclosed mental reservation regarding  the right to claim privilege because it was asserted directly and the perception of a reasonable person would have been that privilege was claimed in respect of the legal opinions. 

Decision

(SCA 533/2019) [2019] ZASCA 191 (13 December 2019)

On appeal from: Western Cape Division of the High Court, Cape Town (Saldanha J sitting as court of first instance).

See below for order.

Judges

Wallis JA (Cachalia, Zondi, Van der Merwe and Mokgohloa JJA concurring)

Heard: 26 November 2019
Delivered: 13 December 2019

Reasons

“I am also unable to appreciate on what basis the opinions could bear upon the just and equitable relief to be granted to the respondents if the review succeeded. That outcome would merely establish that the views of counsel were legally correct. It is a mystery to me how that could influence or affect the just and equitable remedy the court might in due course award. As with any such case the court would hear submissions from the parties and craft an appropriate order. If, as was foreshadowed, the question of remedy was to be held over until the merits had been decided it is conceivable that the court might require further information to be placed before it or to have a separate hearing on remedy. The opinions of counsel would not affect any decision in that regard.” [para 65] . . . . 

‘In the face of that assertion, and applying the approach set out in RAF v Mothupi, there can be no question of the respondents relying on some undisclosed mental reservation in regard to their right to claim privilege. They asserted it directly and the perception of a reasonable person in the shoes of the appellants would have been that they claimed privilege in respect of the opinions. I accept that the mere assertion of privilege will not in all cases preclude a finding that privilege has been waived. The extent of disclosure may be so great; the incorporation of the substance of the document in the claim or defence so apparent; the necessity in all fairness for there to be disclosure if the other party is not to be prejudiced in its conduct of the defence so clamant; that it overrides the expression of a subjective intention not to waive the privilege.

But that is not this case. The content of the opinions was not made an issue in the proceedings and there was no need for the appellants to respond to them. The relevance of their contents to the litigation was not apparent. Finally, the appellants did not attempt to show, as opposed to assert without explanatory detail, why it would be unfair for them to proceed with their opposition to the review without having seen the full opinions. For those reasons I conclude that the legal advice privilege attaching to them was not waived and the appellants were not entitled to an order for their production.” [para 67]

Court summary

‘Discovery – Rule 35(12) of the Uniform Rules of Court – requirements – disclosure – whether legal advice privilege over counsels’ opinions waived – litigation privilege – whether requirements met.”

Quotations from judgment

Note: Footnotes omitted and emphasis added

​Wallis JA (Cachalia, Zondi, Van der Merwe and Mokgohloa JJA concurring)

[38] I have read and agree with the judgment of my brother Cachalia JA dealing with the claim for production of the ‘legal review’ and the KPMG and PwC reports.

This judgment is concerned with the claim for production of two opinions furnished to the respondents by senior counsel.

They were referred to in the founding affidavits but the respondents claim privilege as the ground for resisting their production. The appellants accept that they were privileged, but contend that the privilege was waived by the manner in which the founding affidavit made reference to them.

[39] In a lengthy founding affidavit setting out the factual and legal basis for this review, and when explaining the delay in commencing review proceedings, the deponent, Mr Makasi, explained that the respondents had sought and obtained two opinions from senior counsel.

The opinions were not attached and Mr Makasi’s only comment concerning them was in the following paragraph:

‘Although the advice received from senior counsel is legally privileged and is not, I submit, capable of discovery, given where we are now, suffice it to say that the senior advocates agreed with the outcome of the CEF legal review.’

[40] On the basis of that throwaway remark the appellants contended that there was a waiver of privilege and that the opinions had to be produced in accordance with the provisions of rule 35(12). They argued that the outcome of the legal review was set out broadly in the affidavit and had been summarised a few paragraphs earlier. Its conclusion was that the disposals of the oil reserves did not comply with the conditions imposed in a Ministerial directive relating to such disposals, and that there were indications that they did not comply with provisions of the Companies Act and the Public Finance Management Act.

On those grounds the affidavit concluded that the disposals were liable on review to be set aside. Furthermore Mr Makasi said, at the outset of his affidavit, that insofar as he made legal submissions these were made on the advice of the respondents’ legal representatives. It followed, so the argument ran, that there had been a disclosure of the contents of the two opinions amounting to a waiver of the privilege that would otherwise attach to them.

[41] It is trite that advocates’ opinions attract legal advice privilege. That privilege may be waived. In RAF v Mothupi Nienaber JA explained the basis for considering any waiver of a right in the following terms:

‘Waiver is first and foremost a matter of intention. Whether it is the waiver of a right or a remedy, a privilege or power, an interest or benefit, and whether in unilateral or bilateral form, the starting point invariably is the will of the party said to have waived it. …
The test to determine intention to waive has been said to be objective …. That means, first, that intention to waive, like intention generally, is adjudged by its outward manifestations … ; secondly, that mental reservations, not communicated, are of no legal consequence … ; and, thirdly, that the outward manifestations of intention are adjudged from the perspective of the other party concerned, that is to say, from the perspective of the latter’s notional alter ego, the reasonable person standing in his shoes.’(Citations omitted)

This statement of the basis for finding waiver is equally applicable to the waiver of legal advice privilege.

[42] Arguments over the waiver of legal advice privilege do not commonly arise when there has been an express waiver of the privilege by, for example, providing a copy of a privileged document to the other side. Difficulties arise, as in this case, when it is suggested that a party by their actions has waived the privilege. Customarily this was described as an implied waiver, but in Peacock v SA Eagle Insurance it was suggested that it was preferable to refer to an imputed waiver, because a waiver might arise in such a situation notwithstanding that there might have been no subjective intention to waive the privilege.

Farlam AJ said the following:

‘Although most of the authorities to which I have referred have used the expression “implied waiver” in this context, I have difficulty in seeing how one can speak of privilege being lost by an implied waiver where the party losing the privilege has not intended to waive it in respect of the part of the statement which he has not disclosed. In Attorney General for the Northern Territory v Maurice (1987) 61 ALJR 92 (High Court of Australia) Deane J said (at 98B – C, column 2):

“Plainly enough, there was no actual waiver of the right to assert legal professional privilege in relation to such materials as a matter of subjective intent (see Craine v Colonial Mutual Fire Insurance Co Ltd (1920) 28 CLR 305 at 326). If the right to assert the privilege has been waived, it must be by imputation of law in the circumstances of the case.”

It would seem preferable, therefore, to speak rather of imputed waiver, where, as here, an actual intention to waive cannot be inferred on the facts.’

[43] The necessity for a semantic change from implied waiver to imputed waiver is unclear. Tacit terms in a contract are based upon the implication to the parties of an intention, irrespective of their subjective intention. The interpretation of contracts is objective and evidence of the parties’ intentions or understanding of a contract’s meaning is inadmissible in the absence of a claim for rectification.

Similarly, the enquiry into implied waiver, as explained in RAF v Mothupi, is an objective one based on the outward manifestations of the person’s conduct, irrespective of any mental reservations. In all these cases the law imputes conduct to a person irrespective of their subjective intention.

[44] Be that as it may, it is clear that the change espoused in that case was terminological, not substantive. That was confirmed by the judgment in Harksen v Attorney-General, where this was discussed:

‘The requirements for an implied waiver of legal professional privilege are, firstly, that the privilege holder must have full knowledge of his rights and, secondly, that he must have so conducted himself that, objectively speaking, it can be inferred that he intended to abandon those rights. (See, for example, Laws v Rutherfurd 1924 AD 261 at 263; Borstlap v Spangenberg en Andere 1974 (3) SA 695 (A) at 704F–H.)
There is also authority to the effect that legal professional privilege may be imputedly waived where the privilege-holder so conducts himself that, whatever his subjective intention might be, the inference must in fairness be drawn that he no longer relies on his privilege. (See, for example, Attorney General, Northern Territory v Maurice and Others (1986) 161 CLR 475 (HCA) at 481 ((1987) 61 ALJR 92); Goldberg and Another v Ng [1996] 185 CLR 83 (HCA); Peacock v SA Eagle Insurance Co Ltd … 591–2.)
Wigmore On Evidence 3rd ed vol 8 in the oft-quoted passage in para 2327 does not appear to draw a distinction between an implied waiver and an imputed waiver. Having posed the question: “What constitutes a waiver by implication?” the author supplies the following answer:
“Judicial decision gives no clear answer to this question. In deciding it, regard must be had to the double elements that are predicated in every waiver, ie not only the element of implied intention, but also the element of fairness and consistency. A privileged person would seldom be found to waive, if his intention not to abandon could alone control the situation. There is always also the objective consideration that when his conduct touches a certain point of disclosure, fairness requires that his immunity shall cease, whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder. He may elect to withhold or to disclose, but after a certain point his election must remain final.”

What Wigmore terms “waiver by implication” is in effect “waiver by imputation” as described in the Goldberg, Maurice and Peacock cases supra.’

[45] That the terms waiver by imputation and waiver by implication are synonymous appears from Mann v Carnell, the leading authority on this topic in the former expression’s country of origin.

The relevant passage in the joint judgment of Gleeson CJ, Gaudron, Gummow and Callinan JJ reads as follows:

‘Waiver may be express or implied. Disputes as to implied waiver usually arise from the need to decide whether particular conduct is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. When an affirmative answer is given to such a question, it is sometimes said that waiver is “imputed by operation of law”. This means that the law recognises the inconsistency and determines its consequences, even though such consequences may not reflect the subjective intention of the party who has lost the privilege. Thus, in Benecke v National Australia Bank, the client was held to have waived privilege by giving evidence, in legal proceedings, concerning her instructions to a barrister in related proceedings, even though she apparently believed she could prevent the barrister from giving the barrister’s version of those instructions. She did not subjectively intend to abandon the privilege. She may not even have turned her mind to the question. However, her intentional act was inconsistent with the maintenance of the confidentiality of the communication. What brings about the waiver is the inconsistency, which the courts, where necessary informed by considerations of fairness, perceive, between the conduct of the client and maintenance of the confidentiality; not some overriding principle of fairness operating at large.’(My emphasis)

[46] The High Court of Australia has since reaffirmed that approach in Osland. The applicant had been convicted of the murder of her husband and, after exhausting her appeals, petitioned the governor of the state of Victoria to grant her a pardon. When the attorney-general announced that her petition had been denied, he issued a press release stating that he had appointed a panel of three senior counsel to consider the petition and had received a joint memorandum of advice from them recommending the denial of the petition on all grounds. Ms Osland sought disclosure of this memorandum of advice, claiming that privilege had been waived.

The court unanimously rejected her claim saying that the memorandum was referred to for the purpose of making it clear to the public that independent advice had been sought and followed. In regard to the applicable legal principles the majority (Gleeson CJ, Gummow, Heydon and Kiefel JJ) said:

‘Waiver of the kind presently in question is sometimes described as implied waiver, and sometimes as waiver “imputed by operation of law”. It reflects a judgment that the conduct of the party entitled to the privilege is inconsistent with the maintenance of the confidentiality which the privilege is intended to protect. Such a judgment is to be made in the context and circumstances of the case, and in the light of any considerations of fairness arising from that context or those circumstances.’

[47] Lastly, while considering Antipodean authority, the Federal Court of Australia dealt with the question of when fairness, in the sense used in these judgments, requires disclosure, in Telstra v BT and Adelaide Steamship.

In Telstra, after analysing a number of judgments where the privilege was held to have been waived, the majority formulated the test for unfairness leading to disclosure as being whether the litigant had raised ‘as an element in the cause of action relied upon, an issue incapable of resolution without reference to the material.’

In Adelaide Steamship the court said:

‘In other words the cases are ones in which, in the substantive proceedings brought, the privilege holder has put in issue the very advice received. We observe in passing that it is questionable whether advice can properly said to be in issue in a proceeding merely because it may be relevant to an issue in it … save, perhaps, where the proceeding is between client and legal adviser and the advice is relevant to the adviser’s defence of that proceeding.’

[48] Drawing the threads of both local and foreign authorities together four things emerge that must be considered cumulatively.

  • The first is that there is no difference between implied waiver and a waiver imputed by law. They are different expressions referring to the same thing.
  • The second is that such a waiver may be inferred from the objective conduct of the party claiming the privilege in disclosing part of the content or the gist of the material.
  • The third is whether the disclosure impacts upon the fairness of the legal process and whether the issues between the parties can be fairly determined without reference to the material.
  • Finally, the fourth is that there is no general over-arching principle that privilege can be overridden on grounds of fairness alone.

The rule is ‘once privileged, always privileged’ and it is a fundamental condition on which the administration of justice rests. Only waiver can disturb it.

[49] I have dealt with this in some detail because there may otherwise be some misunderstanding of the legal position and a tendency to regard an implied and an imputed waiver as embodying different legal doctrines, the latter being founded solely on considerations of fairness. That possibility arises from the summary of the legal position in the judgment in S v Tandwa and Others.

That was an appeal against conviction on the grounds that the first appellant’s fair trial rights had been infringed by incompetent legal representation at his trial. His complaint was that he had been wrongly and incompetently advised not to give evidence in his defence. In response to these allegations the State delivered an affidavit by his erstwhile advocate detailing the legal advice given to him. Counsel on his behalf accepted that this affidavit was admissible in assessing his claims, so, so that there was no issue before the court in that regard. Obviously, once the appellant put the quality of the legal advice in issue, he waived the privilege attaching to that advice.

[50] The summary of the law in that case was therefore not strictly necessary for the decision and the judgment contains none of the careful consideration of the authorities that would be required if the intention was to strike out in a new direction. The relevant passage reads as follows:

‘… the admissibility of his advocate’s affidavit depends on whether he waived his right to legal professional privilege. In Peacock v SA Eagle Insurance Co Ltd and Harksen v Attorney-General, Cape, and Others, the courts drew a distinction between implied and imputed waiver of legal professional privilege. Implied waiver occurs (by analogy with contract law principles) when the holder of the privilege with full knowledge of it so behaves that it can objectively be concluded that the privilege was intentionally abandoned. Imputed waiver occurs where – regardless of the holder’s intention – fairness requires that the court conclude that the privilege was abandoned. Implied waiver entails an objective inference that the privilege was actually abandoned; imputed waiver proceeds from fairness, regardless of actual abandonment.’

[51] With respect, neither Peacock v SA Eagle, nor Harksen, drew a distinction between implied and imputed waiver, much less on the basis set out in this passage. Both judgments regarded implied and imputed waiver as synonymous. So did the Australian judgments that first referred to ‘imputed waiver’.

Implied waiver has never been concerned with whether an inference of intentional waiver can be drawn from a person’s objective conduct. If as a matter of fact such an inference can be drawn the case is one of actual waiver. Implied waiver, as all the cases on the subject show, arises where the conduct of the person concerned is objectively inconsistent with the intention to maintain confidentiality and, if permitted, will unfairly fetter the opponent’s ability to respond to the case or defence advanced in reliance on the privileged material. It arises notwithstanding any express reservation of the right to invoke privilege. That was the basis upon which this court held that privilege had been waived in Arcelormittal.

[52] The facts in Arcelormittal are instructive. The Competition Commission had received information and documents from Scaw concerning alleged prohibited practices in the steel industry. Scaw made a formal leniency application in terms of the Commission’s corporate leniency policy. The Commission then conducted its own investigation into pricing in the steel industry and referred a complaint of alleged prohibited practices to the Competition Tribunal for adjudication.

In its referral affidavit the Commission said that Scaw had confirmed in its application for leniency ‘that there had been a long-standing culture of co-operation among the steel mills regarding prices to be charged and discounts to be offered’. In addition there had been arrangements for market division. It referred to its own investigation and concluded that it was ‘as a result of information contained in the Scaw application’ as well as its own investigation that it had made the referral.

[53] Against that background some of the parties against whom the complaint had been made asked for production of the Scaw leniency application. This court pointed out that reference to the information obtained from Scaw was unnecessary, as a referral could have been made simply on the basis of a ‘concise statement of the grounds of the complaint and the material facts or point of law relied on’. By including it the Commission made it part of its cause of action to which the other parties to the referral would have to respond. Without production they could not do so. In the result this court held that there had been an implied waiver of the privilege that would otherwise have attached to the leniency application.

[54] The facts in this case are entirely different. The opinions were referred to solely in the context of explaining the delay. Privilege was clearly asserted. The deponent then added the rather cryptic statement ‘given where we are now, suffice it to say’ that the advocates agreed with the outcome of the legal review. No reliance was placed on the content of the opinions in support of the case that had been set out in some detail in the first three hundred odd paragraphs of the founding affidavit. The prefatory words ‘given where we are now’ referred to the fact that the respondents’ case had already been set out fully in the preceding portion of the affidavit. ‘Suffice it to say’ conveyed that nothing of substance needed to be said about the opinions and the advice received. Nothing of substance was then said, beyond an indication that counsel agreed that the disposal agreements fell to be reviewed and set aside.

[55] Implied waiver is always a factual enquiry and that renders reference to ostensibly similar factual situations potentially misleading. However, there is a passage in the judgment in Avontuur that may be thought to support disclosure in the present case.

Based on Australian authority, it reads:

‘Disclosure of the substance of the advice will occur if the ultimate conclusion, without the supporting reasoning process, or if a summary of the advice is revealed, especially if that is done for forensic or commercial purposes (eg to emphasise the strength and substance of the case to be made) …’

[56] I need make only two comments about this proposition.

  • First, several of the Australian cases relied on pre-dated the decisions in Mann v Carnell and Osland and were inconsistent with them.
  • Second, it propounded as a legal principle what is at most in certain cases a finding to be made on the facts.

That is illustrated by reference to a case relied on in Avontuur and one on substantially similar facts that arrived at an opposite conclusion.

[57] Avontuur relied for the proposition in question on the judgment in Switchcorp, which involved a stock exchange announcement in regard to pending litigation against the company. The announcement saying that:

‘The Board’s lawyers have been instructed to vigorously defend the claim and have advised that the plaintiffs’ claim will not succeed.’

The judge held that this disclosure was inconsistent with maintaining confidentiality and that the unfairness in not disclosing it lay in that inconsistency.

With respect that blurred the question whether there was inconsistency and whether it occasioned or would occasion unfairness in the process of litigation. In my view the decision is inconsistent with the leading Australian cases. It would have been irresponsible for the Board to launch a vigorous defence of the claim without seeking legal advice and it was appropriate (and possibly obligatory) for it to inform shareholders and investors of that fact.

[58] What illustrates the danger of treating decisions on facts as laying down legal principles emerges when one discovers that Switchcorp is incompatible with the decision in GMCG, also by a single judge but in a different state. There the waiver was said to arise from a note in the company’s accounts under the heading ‘Contingent liability’. The note said that the company was engaged in litigation over certain consulting fees and ‘has received legal advice that it has no liability whatsoever’.

Having reviewed the leading authorities already mentioned, the court held that the disclosure was made to explain why there was no provision for the claim in the accounts. The disclosure was restricted to this purpose and nothing more. The contention that the reference to legal advice constituted a waiver of privilege was rejected.

[59] It follows that the general proposition in Avontuur cannot be supported.

Each case must be decided on its own facts and there is no presumption that the disclosure of the gist of legal advice will inevitably amount to conduct incompatible with asserting privilege in relation to the advice itself.

[60] The respondents referred to the opinions in setting out the timeline of the steps taken by them in investigating the disposals. They did not incorporate the contents of the opinions into their case in a way that compelled the appellants to provide a response to those contents without having had sight of them. All the legal points calling for answers were fully set out in the earlier part of the founding affidavit.

[61] The opinions were referred to expressly in the founding affidavit and that brought rule 35(12) into play and justified the request to produce the opinions. The response was to claim privilege. That was a complete answer unless privilege had been waived. It was for the appellants to establish waiver. It is therefore appropriate to look at the reasons advanced by Contango and Natixis on the one hand, and Glencore on the other, for seeking production of the opinions.

[62] Mr Strachan, who deposed to the founding affidavit on behalf of Contango and Natixis, said that the respondents had disclosed the content of the opinions by saying that counsel agreed with the outcome of the legal review. He then advanced two propositions.

  • The first was that privilege is lost once the contents of the document have been disclosed.
  • Secondly he said that fairness dictated that the opinions should be disclosed.

He did not amplify on the considerations of fairness on which he relied. In reply he said that the respondents tried to throw the weight of two counsel’s opinions behind their contentions. Quite rightly the response was that the views of counsel were irrelevant and inadmissible. Courts are only concerned with counsel’s submissions, not their opinions.

[63] Both propositions advanced by Mr Strachan were inconsistent with the law as summarised in para 48 of this judgment. Questions of the waiver of privilege are far more nuanced than that. The nature, extent and purpose of the disclosure is fundamental. Considerations of fairness come into play when the disclosure introduces into the claim or defence contentions that can only be responded to if there is full disclosure is where.

There is no automatic waiver as a result of a partial disclosure, as the facts in both Peacock v SA Eagle and Harksen demonstrate. Nor is fairness an independent ground for holding that there has been a waiver of privilege.

[64] The deponent on behalf of Glencore to the founding affidavit, Ms Smit, said that the contents of the opinions were relevant to the question whether the respondents acted with due expedience after receiving the advice and also to the relief to be granted. I am unable to agree with either proposition. There is no suggestion that the advice sought from and given by counsel related to the timing of legal proceedings or how expeditiously they should be instituted. It was simply said that the advocates agreed with the view of the legal review that the disposal contracts were liable to be reviewed and set aside.

So far as delay was concerned the opinions were relevant to the time taken from December 2016, when the outcome of the legal review was provided to the boards of the respondents and March 2018 when the review was launched. It explained that two months were taken to obtain the first opinion; that there was then a period of five months taken to obtain the KPMG report; and, thereafter, a further period of two days to obtain the second opinion. That was disclosed and the appellants did not need the opinions in order to deal with it.

The suggestion that the opinions may have dealt with the degree of expedition with which proceedings should have been brought was pure speculation. The proposition in reply that the respondents relied on the conclusions in the opinions to justify delay is not borne out by the founding affidavit in the review.

[65] I am also unable to appreciate on what basis the opinions could bear upon the just and equitable relief to be granted to the respondents if the review succeeded. That outcome would merely establish that the views of counsel were legally correct. It is a mystery to me how that could influence or affect the just and equitable remedy the court might in due course award. As with any such case the court would hear submissions from the parties and craft an appropriate order. If, as was foreshadowed, the question of remedy was to be held over until the merits had been decided it is conceivable that the court might require further information to be placed before it or to have a separate hearing on remedy. The opinions of counsel would not affect any decision in that regard.

[66] I accept that the statement that counsel were of the opinion that the outcome of the legal review was correct, constituted a partial and limited disclosure of the conclusion reached in the opinions. In some small measure it may also have conveyed the gist of those opinions, insofar as the basis for the conclusions of the legal review had been set out earlier in the founding affidavit. To that extent there was conduct on the part of the respondents that could objectively speaking be viewed as inconsistent with preserving in full the confidentiality of the opinions. However, that conduct must be seen in the light of the fact that in the very same paragraph a claim that the opinions were privileged was asserted.

[67] In the face of that assertion, and applying the approach set out in RAF v Mothupi, there can be no question of the respondents relying on some undisclosed mental reservation in regard to their right to claim privilege. They asserted it directly and the perception of a reasonable person in the shoes of the appellants would have been that they claimed privilege in respect of the opinions.

I accept that the mere assertion of privilege will not in all cases preclude a finding that privilege has been waived.

  • The extent of disclosure may be so great;
  • the incorporation of the substance of the document in the claim or defence so apparent;
  • the necessity in all fairness for there to be disclosure if the other party is not to be prejudiced in its conduct of the defence so clamant;
  • that it overrides the expression of a subjective intention not to waive the privilege.

But that is not this case. The content of the opinions was not made an issue in the proceedings and there was no need for the appellants to respond to them. The relevance of their contents to the litigation was not apparent.

Finally, the appellants did not attempt to show, as opposed to assert without explanatory detail, why it would be unfair for them to proceed with their opposition to the review without having seen the full opinions. For those reasons I conclude that the legal advice privilege attaching to them was not waived and the appellants were not entitled to an order for their production.