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.

Written by Caroline Theodosiou, Partner at Webber Wentzel