A party to litigation can assert legal privilege when documents or any other evidence is obtained or brought into existence for purposes of such party’s submission to a legal advisor for legal advice and litigation is pending or contemplated as likely at the time.
The facts in this case unpacked the principles of legal privilege.
VBS was placed in liquidation during March 2018 and its liquidators filed papers suing its auditors (who signed off its financial statement) for R864-million, alleging its audit partner defrauded the bank of millions in benefits and cash, lied to the Reserve Bank, acted in bad faith and breached obligations to VBS.
VBS requested specific documents it sought to prove its claim, which included documents exchanged by the auditors with its insurers, audit working documents and their quality control manual which governed the audit of VBS.
The auditors alleged that the documents requested were privileged in that they were obtained for legal advice and that the litigation was either pending or contemplated.
The court considered two principles. The first is that a court will not easily go behind an affidavit which asserts that documents are privileged unless it is clear that the assertion is incorrect or mistaken. The second principle is that documents must exist for purposes of legal advice and litigation which is pending or contemplated as likely at the time.
The auditors contended that the documents sought were clothed with privilege as criminal proceedings and disciplinary hearings were pending against certain individuals of the company and such documents.
The court held that internal disciplinary hearings do not qualify as litigation, nor did it accept that criminal charges against a specific individual would clothe the auditors with the right to claim that it envisaged litigation and thus a claim for privilege could be made on those documents. If a claim of privilege in criminal proceedings exists for purposes of this civil claim, it is a claim for the accused to raise.
The court found that only the documents that exist in contemplation of litigation would be privilege, such documents being all the insurance documents compiled when VBS was placed under curatorship in 10 March 2018. All documents prior to this date were not privileged and had to be discovered.
VBS Mutual Bank (In Liquidation) v KPMG Incorporated (2021/8826) [2022] ZAGPJHC 567 (18 August 2022)
