About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Western Cape High Court, Cape Town
SAFLII
>>
Databases
>>
South Africa: Western Cape High Court, Cape Town
>>
2014
>>
[2014] ZAWCHC 33
|
|
A Company and Others v Commissioner for the South African Revenue Services (16360/2013) [2014] ZAWCHC 33; 2014 (4) SA 549 (WCC); 76 SATC 321 (17 March 2014)
REPUBLIC OF SOUTH
AFRICA
IN THE HIGH COURT
OF SOUTH AFRICA
(WESTERN CAPE
DIVISION, CAPE TOWN)
Case
No: 16360/2013
DATE:
17 MARCH 2014
REPORTABLE
Before:
The Hon. Mr Justice Binns-Ward
In the matter
between:
A COMPANY
AND
TWO
OTHERS
..............................................................
First,
Second and Third Applicants
And
THE COMMISSIONER
FOR THE
SOUTH AFRICAN
REVENUE
SERVICES
....................................................
Respondent
JUDGMENT:
DELIVERED: 17 MARCH 2014
BINNS-WARD
J:
[1]
This case concerns a claim by the
applicants to legal professional privilege; legal advice privilege in
particular. Legal
advice privilege covers communications
between lawyers and their clients whereby legal advice is sought or
given.
[1]
As confirmed by the Constitutional Court in
Thint (Pty) Ltd v National Director of
Public Prosecutions and Others, Zuma and Another v National Director
of Public Prosecutions
and Others
,
[2]
‘[t]he right to legal professional privilege is a general rule
of our common law which states that communications between
a legal
advisor and his or her client are protected from disclosure, provided
that certain requirements are met.’
[3]
The requirements are (i) t
he
legal advisor must have been acting in a professional capacity at the
time; (ii) the advisor must have been consulted in
confidence;
(iii) the communication must have been made for the purpose of
obtaining legal advice; (iv) the advice must
not facilitate the
commission of a crime or fraud; and (v) the privilege must be
claimed.
[4]
The character of the rule is accepted to be substantive rather than
procedural; see
S v Safatsa and Others
[5]
,
adopting a passage in the judgment of Dawson J in
Baker v
Campbell
[6]
in the High Court of Australia to the effect that ‘[legal
professional]
privilege extends beyond communications made for the
purpose of litigation to all communications made for the purpose of
giving
or receiving advice and this extension of the principle makes
it inappropriate to regard the doctrine as a mere rule of evidence.
It is a doctrine which is based upon the view that confidentiality is
necessary for proper functioning of the legal system and
not merely
the proper conduct of particular litigation....
’.
(The judgments in
Baker v Campbell
provide a compendious and
most useful international survey of the pertinent jurisprudence on
the history and development of the
rule.
[7]
)
[2]
The rationale for the privilege has been expressed in various
ways and has evolved over the centuries. Thus at one stage the
privilege was even considered to be that of the lawyer rather than of
the client and, until well into the nineteenth century it
applied
only in respect of communications in relation to pending or
contemplated litigation. In my respectful view the description
by Sir Gordon Slynn (as he then was) in
A M & S Europe Ltd v
Commission of the European Communities
(
Case 155/79
)
[8]
would be difficult to better as a modern expression of the ethos
underpinning the existence of the rule and the premium that societal
values attach to it:
Whether
it is described as the right of the client or the duty of the lawyer,
this principle has nothing to do with the protection
or privilege of
the lawyer. It springs essentially from the basic need of a man in a
civilised society to be able to turn to his
lawyer for advice and
help, and if proceedings begin, for representation; it springs no
less from the advantages to a society which
evolves complex law
reaching into all the business affairs of persons, real and legal,
that they should be able to know what they
can do under the law, what
is forbidden, where they must tread circumspectly, where they run
risks.
[3]
The applicants, which are three companies
in a well-known group of companies, have applied for a declaratory
order that certain
content of two fee notes rendered by their
attorneys to the first applicant is properly subject to the claim of
legal advice privilege
that they have sought to assert as the basis
of their refusal to disclose portions of the invoices, when complying
with a request
by the Commissioner of the South African Revenue
Service (SARS) in terms of
s 46
of the
Tax Administration Act 28
of 2011
.
[9]
Copies of the invoices in question have been supplied to SARS, but
the applicants have redacted the content thereof that
is subject to
the claim of privilege. The application by the companies for
declaratory relief has been brought in the context
of the
Commissioner’s insistence on being provided with unexpurgated
copies of the documents concerned.
[10]
It has not been suggested by the Commissioner that the provisions of
the
Tax Administration Act or
any other applicable statutory
instrument override a taxpayer’s right to claim legal
professional privilege. The issue
to be determined is thus
simply whether the privilege that has been claimed actually subsists.
[4]
A brief description of the factual ground
is necessary to explain how the issue arose. In the course of
an audit of the applicants’
tax affairs the Commissioner
indicated his requirement that the applicants provide SARS with
copies of certain documentation.
The requirement included a
request for a breakdown of an identified trial balance account in
respect of professional fees in the
books of one of the applicant
companies pertaining to the 2009 year of assessment. In the
response given to the Commissioner,
the senior tax manager of the
second applicant, which was dealing with the Commissioner’s
requirements on behalf of the other
two applicants, gave a breakdown
of the fees involved, together with certain ‘supporting
invoices’. She stated
in the relevant portion of the
covering letter under which the information was provided: ‘We
have to date been unable to
obtain a copy of the DLA Cliffe Dekker
Hofmeyr invoice of Rxxx. We will send this through as soon as
we have traced a copy’.
(DLA Cliffe Dekker Hofmeyr is a
firm of attorneys.
[11]
)
Two tax invoices were in fact involved.
[5]
When the feenotes were subsequently traced,
the applicants noted (i) that they had been addressed to the first
applicant, (ii) that
the fees concerned had been raised in
respect of legal professional services rendered by the attorneys to
the first and third applicants
and (iii) that (so it was
averred) ‘the invoices set out the nature of the advice sought
by the first and third applicants’.
Privilege was claimed
on the basis that ‘the nature of the advice sought by the first
and third applicants is discernible
from the invoices’.
The applicants therefore refused, notwithstanding their previous
undertaking to provide copies
of the documents when they became
available, to hand over copies of the fee notes. Their decision
was explained in an email
to SARS as follows:
In the
response dated 30 August 2013 we note that we will send through
the copy of the DLA Cliffe Dekker Hofmeyr invoice as
soon as we have
traced a copy. We have taken advice on this aspect and note
that all communications between attorneys and
their clients are
legally privileged, including legal invoices. You will note
that we did not claim a deduction in respect
of these invoices.
As such, we will not be providing copies of these legal invoices to
you.
[6]
The respondent responded to the applicants’
claim of privilege by stating its inability to accept that the
invoices in question
(or indeed any lawyer’s feenote for that
matter) were legally privileged. SARS called on the applicants,
should they
persist in their stance, to provide it with particulars
of their argument in support of their position. It also
contended
that, even had the invoices been privileged, the privilege
would have been waived if the invoice had been made available to the
applicants’ auditors for the purposes of a financial statement
audit. SARS asked the applicants to indicate whether
the
invoices had been disclosed to the companies’ auditors or any
other third parties.
[7]
The applicants were unable to say with
certainty whether the documents had been made available to their
auditors, but contended
that, even if they had been, the disclosure
would have been in confidence for the specific purpose of auditing,
and a waiver of
privilege would not have been entailed.
[12]
The applicants reiterated that the basis of their claim of privilege
was that the invoices contained ‘details of advice
sought in
confidence from our attorneys’. It was at this stage that
the redacted copies of the fee notes were provided
to SARS ‘in
a spirit of co-operation’ and purportedly ‘without
prejudice’ to the applicants’ right
to assert privilege
in respect of the whole documents.
[8]
SARS refused to accept the redacted fee
notes as adequately complying with its demand for information.
In an email, dated
12 September 2013, it noted that the applicants
had failed to provide any motivation or argument in support of their
position.
Having considered the disclosed content of the
feenotes, SARS asserted that it seemed clear ‘that at best such
invoices provide
a description of the task performed by the advisor
and in some cases what documents were reviewed. The detail
provided does
not in any way constitute advice given by an attorney
to a client’. SARS contended that the applicants’
position
was therefore ‘self-evidently unsupportable’.
It required the unexpurgated invoices to be furnished to it within
24
hours.
[9]
In a letter to SARS, dated 16 September
2013, the applicants reiterated their position in the following
terms:
We confirm
that our view is that the legal professional privilege extends to
communications between attorneys and clients which
are made in
confidence for the purpose of obtaining legal advice. The
privilege does not only attach to the advice itself.
Where the
communication is so closely linked to the advice sought that by
disclosing the communication the privilege would be undermined,
the
communication itself does not have to be disclosed.
As we have
previously advised, the invoices in question contain certain
narratives which refer specifically to the advice sought,
and if
disclosed, would undermine the privilege of our communications with
our legal advisors. As such, these invoices are
privileged.
In the spirit of co-operation, we have provided you with the invoices
(without conceding that they are not privileged),
and redacted only
those portions which refer pertinently to confidential advice sought.
[10]
The application papers did not give any
greater detail as to the basis upon which the alleged privilege was
claimed other than that
which is apparent from the extracts from the
correspondence between the applicants and SARS that have been quoted
in the preceding
paragraphs. The applicants did not even attach
copies of the redacted invoices to their founding affidavit.
[11]
It follows that on the founding papers read
on their own the court was provided with no basis to examine the
assertion of legal
advice privilege other than the applicants’
say so. Leaving aside the possible effect of their partial
disclosure of
the documents, the only basis upon which the applicants
could have succeeded in obtaining declaratory relief on that approach
would
be an acceptance by this court of a line of English authority
which extends legal professional privilege to the content of
solicitors’
feenotes as a blanket rule. Whether that
authority still holds good, and, if it does, whether this court
should apply it,
are among the questions to which attention will be
given later in this judgment. The point to made, however, is
that in general
it is not possible to judge whether privilege is
validly claimed or not if the context is not provided. This was
aptly illustrated
in this example given by Lord Scott of Foscote in
Three Rivers District Council & Ors v. Bank of England
(No. 6)
,
[13]
at para 42:
Mr Pollock referred to
advice sought from and given by a lawyer as to how to set about
joining a private club. He put this forward
as an obvious example of
a case where legal advice privilege would not be attracted. The
reason, Mr Pollock suggested, was that
the advice being sought would
not relate to the client's legal rights or obligations. I agree that
legal advice privilege would
not be attracted, not because the advice
would necessarily not relate to the client's legal rights or
obligations but because the
bare bones of Mr Pollock's example had no
legal context whatever. If his example were embellished with detail
the answer might
be different. Suppose the applicant for membership
of the club had previously made an unsuccessful application to join
the club,
believed that his rejection had been inconsistent with the
club's admission rules and wanted to make a fresh application with a
view to testing the legality of his rejection if he were again to be
blackballed. I think Mr Pollock would accept that in those
circumstances the communications between the lawyer and the applicant
would be protected by legal advice privilege. It would be
protected
because the communication would have a relevant legal context. It
would relate to the legal remedies that might be available
if the
applicant's application were again unsuccessful.
The difficulty that I have had in the
current matter, as I shall explain more fully later, is that the
applicants’ papers
have provided me with virtually nothing by
way of relevant legal context. They also did not explain how
mere reference in
the feenotes to work done or documents considered
would ‘undermine’ the applicants’ privilege in
respect of the
content of communications with their attorneys
concerning the seeking and giving of advice.
[12]
The respondent’s answering papers
explained the context in which SARS’s insistence on being
furnished with uncensored
copies of the fee notes was being pursued.
It is unnecessary to go into the detail. Suffice it to say that
the Commissioner
considered that the content of the invoices might go
to confirm that the applicants, or fellow entities in the group of
companies
of which they were part, had knowledge of the flow of funds
involved in certain ‘structured finance arrangements’ in
respect of which SARS had decided to reassess the third applicant’s
liability for payment of income tax and secondary tax
on companies.
The relevant detail was set out in two letters of findings addressed
by SARS to the third applicant in this
connection, dated 15 October
2013 and 28 November 2013, respectively, which served as notices
in terms of s 80J(1)
of the Income Tax Act 58 of 1962
[14]
and
s 42
of the
Tax Administration Act.
[15
]
[16]
Copies of the letters were annexed to the respondent’s
answering affidavits.
[13]
The applicants took exception to the
disclosure of their confidential information by way of the attachment
to the respondent’s
papers of the aforementioned notices.
SARS explained its annexure of the material as having been to deal
with what the Commissioner
had apprehended to be a contention by the
applicants that the content of the invoices was not relevant to the
investigation being
undertaken by SARS. Lack of relevance would
have afforded a separate ground for resisting its disclosure, quite
discrete
from that of legal professional privilege. Having
regard to the tenor of the correspondence exchanged between the
parties,
which was annexed to the founding papers, and in which the
applicants’ right to contend that the information sought was
irrelevant
was reserved, I consider that the respondent’s
apprehension of the applicants’ position in this respect was
reasonably
formed. The answering papers were handled
sensitively to prevent any unwarranted invasion of the applicants’
privacy
and, by agreement between the parties, the court was
requested to hear the application
in
camera
, which duly happened. In
the event, the applicants did not persist at the hearing with any
argument that they were entitled
to withhold the invoices, or any of
the content thereof, for want of relevance. For the purposes of
the declaratory relief
that they seek in these proceedings the
applicants confined the basis of their alleged entitlement to
withhold part of the content
of the documents to legal advice
privilege.
[14]
SARS explained in its answering affidavit
that it been engaged in an investigation of the tax affairs of the
group of which the
applicant companies are part for some time.
The investigation encompassed a number of aspects including the
aforementioned
structured finance arrangements and a joint venture
with an offshore consortium, which SARS suspects may involve tax base
erosion
by shifting profits offshore. SARS’s
investigations in this regard were said to encompass risks relating
to employees’
tax and aspects pertaining to s 8C of the
Income Tax Act (which regulates the taxation of directors and
employees on the vesting
of equity instruments). The offshore
consortium involved was thought to consist of former directors and
employees of another
company in the group. Insight into the
invoices was also required because it was foreseen that they might
provide relevant
factual information pertinent to the wide-ranging
investigation by SARS into the group of companies’ tax affairs.
[15]
The respondent’s answering affidavit
set out the following grounds for SARS’s refusal to accept the
validity of the
applicants’ claim to privilege:
1.
The nature of the documents as invoices:
It was contended that invoices are not ordinarily issued in
confidence and that the
attorneys must have appreciated when they
rendered the feenotes that they would be subject to disclosure by the
client to the tax
authorities because of income and value added tax
implications. The respondent stressed that the applicants’
initially
indicated willingness to make copies of the documents
available as soon as they could be located was consistent with SARS’s
assessment of the non-confidential character of the invoices.
2.
The invoices were not issued for the
purposes of obtaining or providing legal advice. Their purpose
was to state the services
provided to the applicants and the
remuneration demanded therefor by the attorneys.
3.
It would appear, by contextual inference
from the disclosed portions of the feenotes, that the redacted
information comprises predominantly
of the names or descriptions of
certain agreements, transactions and documents. It was
contended that the mere factual existence
of such agreements,
transactions and documents, and that the attorneys had worked on or
had regard thereto, did not cloak them
with privilege. The mere
identification of such matters in the invoices would not, by itself,
convey the nature or substance
of any advice that might have been
sought or received, so the argument continued.
[16]
SARS also contended that, by having
unconditionally undertaken to furnish the invoices when they were
located, the applicants had
waived any privilege that they might have
been able to assert in the documents. That contention may be
disposed of shortly.
There is no merit in it. The nature of the
alleged waiver on which the respondent seeks to rely is known as
implied or imputed
waiver. The test for identifying such waiver
is objective,
meaning that it must be judged by its outward
manifestations; in other words from the perspective of how a
reasonable person would
view it.
It was
quite evident that the documents had not been at hand when the
undertaking was given and there was no reason for SARS to
have
understood that the undertaking had been given with knowledge of the
detailed content of the documents. In the circumstances
SARS
could not reasonably have construed the giving of the undertaking as
a waiver of the applicants’ right to assert privilege
in
respect of any part of the content of the feenotes when they were
found. That is certainly the case if it is assumed,
as SARS
argued, and as I shall presently hold, that attorneys’ feenotes
are not
per se
privileged documents.
[17]
In their replying affidavit, the applicants
argued that it was not the character of the documents as attorneys’
feenotes that
was determinative of the validity of the applicants’
claim to privilege, but whether ‘certain of the
contents
of the disputed invoices are privileged, to the extent that they set
out the nature of the advice sought by the Applicants from
their
attorneys and/or the advice given by those attorneys’.
The applicants thus abandoned any claim that have been
discerned in
their founding papers that the documents were privileged
per
se
, and stated their case actually to
be that the advice sought by them from their attorneys (which they
averred was reflected in
the content of the invoices) was privileged
by reason of having been sought in confidence from their legal
advisers acting in their
capacity as such. In that context, the
applicants asserted that the fact that the invoices might not have
been issued in
confidence was irrelevant.
[18]
The applicants also indicated their
intention to make uncensored copies of the invoices available for
inspection by the court at
the hearing for purposes of a so-called
‘judicial peek’. In this connection the deponent to
the applicants’
replying affidavit proceeded:
The Court’s
perusal of the disputed invoices will, indeed, confirm that the
Applicants “
deleted
” [inter alia]
the names or
descriptions of certain agreements, transactions and documents from
the copies of the disputed invoices it provided
” to the
Respondent.
This deleted
information, it is submitted, is privileged because it identifies the
subject matter of the advice sought, and the
entities in respect of
which such advice was sought.
[19]
The respondent served a notice on the
applicants in terms of uniform rule 35(12) calling for copies of the
agreements and documents
mentioned in the aforementioned extract from
the replying affidavit. The applicants declined to provide the
documentation,
pointing out that doing so would result in the
disclosure of the very matter in respect of which they had claimed
privilege.
[20]
The respondent then brought an
application for an order compelling the applicants to comply with the
notice. That application
was served on the day before the main
application was to be heard and was moved in the course of the
argument of the main application.
I shall deal with it
presently.
[21]
There was no dispute between counsel for
the parties when the matter was argued as to the import of the
substantive right to legal
advice privilege, broadly stated, but they
took issue on its ambit. Thus, as mentioned earlier, the
respondent contended
that the privilege does not extend to the
redacted parts of the invoices in issue merely because they contain
mention of ‘certain
agreements, transactions and documents’
that may have been referred to, drafted, or effected in the context
of communications
between the applicants and their attorneys in
respect of the seeking or giving of legal advice. That broad
agreement as to
the conceptual character of legal advice privilege
does not exclude scope for quite fundamental differences as to the
ambit of
attorney-client communications that are included or excluded
is illustrated by the jurisprudence. The most relevant cases
are all foreign. Indeed, counsel were not able to find any
South African judgment that deals in any particularity with the
question that presents in the current matter.
[22]
The divergence of judicial opinion that was
manifest in the English jurisprudence is illustrated in the
historical overview undertaken
by Taylor LJ in the Court of Appeal’s
judgment in
Balabel and another v Air
India
.
[17]
The appeal in that matter was against the decision of a single judge
overruling a decision made by a master, who had upheld
the
appellant’s claim of privilege in respect of documents of the
following sort that had been sought by the respondent in
the context
of litigation concerning the conclusion of an underlease:
(i) communications between the appellant and its solicitors
other than those seeking or giving legal advice, (ii) drafts,
working papers, attendance notes and memoranda of the appellant’s
solicitors relating to the proposed new underlease and (iii) internal
communications of the appellant other than those seeking
advice from
their Indian legal advisers. The judge in the High Court -
taking a different view in principle from that adopted
by the master
- had ordered disclosure of some of the documentation. In this
regard the judge had followed the approach of
Scott J (as he
then was) in
Galadari’s Receivers
v Zealcastle Ltd
(6 October 1986)
(unreported). It appears from the Appeal Court judgment that
the judge in the High Court had concluded as
follows:
The defendants
in my judgment are entitled to withhold all communications which seek
or convey advice, even though parts of them
may contain narratives of
facts or other statements which in themselves would not be protected.
On the other hand, documents which
simply record information or
transactions, with or without instructions to carry them into
execution, or which record meetings
at which the plaintiffs were
present, are not privileged.
As Taylor LJ
observed,
[18]
‘On the judge’s ruling, a selective exercise was required
to withhold only those documents seeking or giving advice
and to
disclose any which merely recorded information or events or gave
instructions. He carried out that exercise and ruled that
a number of
documents specified in the schedule to his order should be
disclosed’.
[23]
The approach adopted by Scott J in
Galadari’s Receivers
was described by Taylor LJ as follows:
In
that case the defendant wished to enforce a charge they had obtained
against Mr Galadari’s interest in a property. The
legal title
to the property was discovered to be vested in a company. The
defendants sought disclosure of documents in the possession
of Mr
Galadari’s solicitors to establish his beneficial interest. The
scope of the privilege attaching to such documents
was contested.
Scott J noted the conflict in the authorities and suggested
there might be a distinction between cases where
discovery was sought
from the client rather than the solicitor. He said:
‘
I
am therefore satisfied that I ought to approach the present case by
applying the principle expressed by Lord Atkin in
Minter
v Priest
[1930]
AC 558
,
[1930] All ER Rep 431
rather than by considering whether the
broader view of privilege, which might perhaps be relevant in a case
like
Greenough
v Gaskell
(1833)
1 My & K 98, [1824–
34] All ER Rep 767
, where only the
solicitor was being sued, is still good law. With that principle in
mind I must I think look at the documents which
are in issue in the
case and come to a conclusion whether they can fairly be regarded as
a request by Mr Galadari … for
legal advice or whether the
documents represent the giving of legal advice either to Mr Galadari
or to an agent of his. These documents
would be privileged. But none
of the documents which simply record the transaction which Mr
Galadari had instructed his solicitor
to implement, or document the
putting into effect of the transaction, or the formation of the Swiss
company, or which passed between
Norton Rose Botterell & Roche
[Mr Galadara’s solicitors] and the vendor’s solicitors on
the acquisition of 10 Curzon
Place, or the conveyance documents,
would, in my view, be documents in respect of which Mr Galadari could
claim protection on the
grounds of legal professional privilege.’
[19]
[24]
The Appeal Court held that the approach
manifested in the reasoning in the judgment in
Galadari’s
Receivers
defined the scope of legal
advice privilege too narrowly. In that regard Taylor LJ
expressed himself as follows:
…
.the
purpose and scope of the privilege is … to enable legal advice
to be sought and given in confidence. In my judgment,
therefore, the
test is whether the communication or other document was made
confidentially for the purposes of legal advice. Those
purposes have
to be construed broadly. Privilege obviously attaches to a document
conveying legal advice from solicitor to client
and to a specific
request from the client for such advice. But it does not follow that
all other communications between them lack
privilege. In most
solicitor and client relationships, especially where a transaction
involves protracted dealings, advice may
be required or appropriate
on matters great or small at various stages. There will be a
continuum of communication and meetings
between the solicitor and
client. The negotiations for a lease such as occurred in the present
case are only one example. Where
information is passed by the
solicitor or client to the other as part of the continuum aimed at
keeping both informed so that advice
may be sought and given as
required, privilege will attach.
…
..
It may be that
applying this test to any series of communications might isolate
occasional letters or notes which could not be said
to enjoy
privilege. But to be disclosable such documents must be not only
privilege-free but also material and relevant. Usually
a letter which
does no more than acknowledge receipt of a document or suggest a date
for a meeting will be irrelevant and so non-disclosable.
In effect,
therefore, the ‘purpose of legal advice’ test will result
in most communications between solicitor and client
in, for example,
a conveyancing transaction being exempt from disclosure, either
because they are privileged or because they are
immaterial or
irrelevant.
…
..
It follows
from this analysis that those dicta in the decided cases which appear
to extend privilege without limit to all solicitor
and client
communication on matters within the ordinary business of a solicitor
and referable to that relationship are too wide.
…
.
By contrast,
the formulation adopted by [the judge a quo] and quoted earlier in
this judgment is in my view too restrictive. It
suggests that a
communication only enjoys privilege if it specifically seeks or
conveys advice. If it does so, it is privileged,
notwithstanding it
may also contain ‘narratives of fact or other statements which
in themselves would not be protected’.
However, the second half
of the judge’s formulation implies that all documents recording
information or transactions with
or without instructions or recording
meetings lack privilege if they do not specifically contain or seek
advice. The passage cited
above from the judgment of Scott J in
Galadari’s Receivers v Zealcastle Ltd
is to the same
effect. In my judgment that formulation is too narrow. As indicated,
whether such documents are privileged or not
must depend on whether
they are part of that necessary exchange of information whose object
is the giving of legal advice as and
when appropriate. Accordingly, I
agree with the formulation made by the Chief Master in the present
case, subject to the additional
words which I have placed in
brackets. He said:
‘
Once
solicitors are embarked on a conveyancing transaction they are
employed to ensure that the client steers clear of legal
difficulties,
and communications passing in the handling of that
transaction are privileged [if their aim is the obtaining of
appropriate legal
advice] since the whole handling is experience and
legal skill in action and “a document passing during a
transaction does
not have to incorporate a specific piece of legal
advice to obtain that privilege.’
[25]
It appears to be accepted that the judgment
of the Court of Appeal in
Balabel
correctly expresses the scope of legal
advice privilege in English law. The House of Lords decision in
Three Rivers District Council (No.6)
supra,
[20]
confirmed that the concept of what falls within the expression ‘legal
advice’ for the purposes of legal advice privilege
goes not
only to advice on the law, but also, as pointed out by Taylor LJ
in
Balabel
,
‘advice as to what should prudently and sensibly be done in the
relevant legal context’, including advice as to how
a client’s
position or case should best be presented.
[26]
It is suggested in
Thanki
(ed),
The Law of Privilege
Second Edition (Oxford), at 2.111 -2.112, with reference to a passage
in the opinion of Lord Carswell in
Three
Rivers District Council (No.6)
, that
the House of Lords applied a ‘somewhat broader’
definition of the ambit of legal advice privilege than that stated
in
Balabel
.
I do not share that view. On my reading of the passage in
question
[21]
it amounts to no more than an affirmation that
Balabel
,
properly read, does not derogate from the point made in
Minter
v Priest
[1930] AC 558
that the
privilege extends to all attorney-client communications directly
related to the seeking or giving of such advice. However,
Thanki’s conclusion that the effect of the cases is that the
English law is currently correctly stated as follows:
…
if
there is a legal context, privilege attaches to
all
communications between lawyer and client, provided that they are:
·
directly related
to the performance of the lawyer’s professional duties as legal
adviser to the client and
·
made for the
purpose of obtaining legal advice and assistance.
(emphasis in the original)
appears to me to be
correct on either reading of the judgments. Subject to the
other requirements of legal professional privilege
mentioned at the
outset of this judgment,
[22]
which also apply in English law, this accords with our own law, as
stated in, amongst others,
S v
Kearney
[23]
and
Lane and Another NNO v Magistrate,
Wynberg
.
[24]
[27]
The authorities just discussed go to the
identification of documents that are susceptible to legal
professional privilege, and not
directedly to the question that
presents in the current case, which concerns the assertion of
privilege in respect of covered up
parts of an otherwise unprivileged
document that has been disclosed. If a document is privileged
disclosure of part of it
may constitute an implied or imputed waiver
of the whole. It is therefore appropriate to consider whether a
lawyers’
feenote qualifies by its nature and as a general rule
as a privileged document.
[28]
As mentioned, there is a line of English
authority that holds that solicitors’ feenotes are
privileged.
[25]
Indeed, in
International Business
Machines Corp and another v Phoenix International (Computers)
Ltd
,
[26]
Aldous J remarked, concerning feenotes that had been discovered
erroneously, ‘
IBM do not dispute
that the bills are documents for which privilege could have been
claimed and that any solicitor would realise
that
’
[27]
and ‘(t)
he reasonable solicitor
would have been in no doubt that the legal bills were privileged
documents
’.
[28]
Whether the approach taken in England up to now is well-founded
in principle has, however, been questioned. The issue
is
treated of in Chap 2 of Thanki op cit supra, at 2.129 -2.130,
s.v. ‘
Practical examples and
difficult areas
’ in a section
entitled ‘
What Constitutes Legal
Advice or Assistance
’, as
follows:
It seems that
in English law, lawyers’ feenotes have generally been regarded
as privileged. However,
Ainsworth v Wilding
[[1900]
2 Ch
315]
is an authority going the other way, where the court held that
the defendant could cover up parts of the bill which described work
undertaken so as not to reveal the advice given but other sections
which revealed what had happened in the judge’s chambers
were
not privileged. This decision is more in keeping with the law
in New Zealand where it has been held that feenotes are
not
privileged by their nature, although they may contain passages in
respect of which privilege can properly be claimed.
It
is suggested that feenotes should not automatically be regarded as
privileged in their entirety in the light of
Three Rivers 6
:
they are undoubtedly confidential communications between lawyer and
client, but it is difficult to say that they are directly
related to
the
performance
of the retainer by the lawyer. Of course
the contents of most feenotes, although no doubt of great interest to
the opposing
party, will be utterly irrelevant to any dispute between
them and therefore will not be subject to disclosure on the grounds
of
relevance. But if feenotes do contain relevant information,
they should only be privileged to the extent that entries in them
constitute secondary evidence of privileged communications.
Irrelevant, but no doubt confidential, entries can of course
be
redacted.
(footnotes
omitted)
See also Malek et al (ed)
Phipson on Evidence
18
th
ed. (2013) at 23-57:
It is
suggested that a blanket rule [that lawyers’ feenotes are
privileged] is neither necessary nor consistent with modern
principles of privilege. The way in which bills are submitted is a
matter of practice and will vary with time and there is no reason
why
the court should be hidebound by old authorities. If a bill of costs
does not reveal anything as to the contents of the communications
between lawyer and client, why should it attract privilege?
I would venture that if the
question were to be pertinently revisited by the English courts, it
is probable that it would be answered
consistently with the opinion
expressed in the passages just quoted from the two aforementioned
leading textbooks.
[29]
The New Zealand authority cited in the
aforegoing passage from Thanki op cit in support of his statement of
the law in New Zealand
is
Kupe Group v
Seamar Holdings
[29]
.
In that matter Master Kennedy-Grant merely followed his earlier
judgment in
Re Merit Finance and
Investment Group Ltd
,
[30]
where, in dealing with a contention by counsel that solicitors’
statements were not a character of document that ‘qua
category
attract privilege’, he held:
…
and
the fact that the contents of
solicitors' statements and/or bills of costs, on the one hand, and
their trust account records, on
the other hand, may disclose the
terms of privileged communications, do not (
sic
),
in my opinion, make the distinction between communications and other
acts unworkable. (It should be remembered that, in reality,
speech is
an act.) The essential question in any consideration of whether or
not a document is privileged is, was it brought into
existence for
the purpose of "getting or giving confidential legal advice or
assistance"?: 13
Halsbury's
Laws of England
(4th ed) para 74 and
R
v Uljee
[1982] 1
NZLR 561
at p 570.
I
accordingly accept Ms Olsen's third submission that solicitors'
statements and/or bills of costs and trust account records do
not, as
categories of document, attract legal professional privilege. A
particular document or part of a particular document may
attract
legal professional privilege as a communication made for the purpose
of getting or giving confidential legal advice or
assistance. If
there are any such documents among those of which production is
sought, or any such passages in any such documents,
then the claim of
legal professional privilege must be made in relation to the
particular documents or passages.
[31]
It is evident from
the judgment in
Re Merit Finance
,
however, that, certainly as of 1993, the state of authority in New
Zealand was divided, with some judgments following the line
taken in
English cases such as
Chant v Brown
and
Turton v
Barber
.
[32]
In my judgment the position as stated in
Re
Merit Finance
accords with the
description of the ambit of legal advice privilege that may be
distilled from the line of English authority exemplified
by the
judgments in
Minter v Priest
,
Balabel
and
Three Rivers (6)
,
mentioned earlier.
[30]
Thus, as our law in point has historically
been premised on the English law, it seems to me that applying the
reasoning in the three
last-mentioned English judgments in a
principled manner in the local context would impel the conclusion
that attorneys’ feenotes
are not amenable to any blanket rule
that would characterise them as privileged communications
per
se
. Feenotes are not created for
the purpose of the giving of advice and are not ordinarily of a
character that would justify
it being said of them that they were
directly related to the performance of the attorney’s
professional duties as legal adviser
to the client. They are
rather communications by a lawyer to his or her client for the
purpose of obtaining payment for professional
services rendered; they
relate to recoupment for the performance of professional mandates
already completed, rather than to the
execution of the mandates
themselves. They thus do not form part of the ‘continuum
of communications’ postulated
in Taylor LJ’s judgment in
Balabel
.
For that reason the English judgments that appear to clothe lawyers’
feenotes with privilege as a blanket rule should
not be followed in
my view. The abandonment by the applicants of their initial
claim of blanket rule privilege in respect
of the invoices as
lawyers’ feenotes was therefore well advised. (The reason
why I have dealt with this aspect at some
length is that my finding
on the question of waiver
[33]
might well have been different if the feenotes fell to be regarded as
a category of privileged documents
per
se
.)
[31]
It is, however, readily conceivable, if not
probable in fact, that attorneys’ fee notes might contain
references to legal
advice sought and given in the course of a
narration of the services in respect of which the fees have been
raised. It is
indeed references of that sort that are in issue
in the current matter. In my judgment, mere reference to advice
sought or
given does not equate to disclosure of the substance of the
advice. Disclosure by reference in a document which is not
itself
privileged of the mere fact that advice has been sought on a
question or that it has been given therefore does not give rise to
any privilege. It is the actual communications between the
client and the lawyer involved in the seeking and giving of the
advice - identifiable as such within the broad and generous
parameters referred to in cases like
Balabel
and
Three
Rivers 6
– or references in other
documents that would disclose their content or from which their
content might be inferred that are
the matter in respect of which
legal advice privilege may be claimed. That does not include
the content of a document which
merely records, without disclosing
their substance, that such communications have occurred. Thus,
if the feenote refers to
the advice only in terms that describe that
it was given, without disclosing its substance, I do not consider
that the mere reference
would be sufficient to invest the relevant
content of an otherwise unprivileged document or communication with
legal advice privilege.
[34]
The position would be different, of course, if the feenote set out
the substance of the advice, or contained sufficient particularity
of
its substance to constitute secondary evidence of the substance of
the advice.
[32]
My views in this regard find support, I
think, in the judgment of Richards J in the Chancery Division in
Financial Services Compensation Scheme
Ltd. v Abbey National Treasury Services Plc
,
[35]
which, like the current matter, was a case in which a party had
asserted legal advice privilege in respect of redacted portions
of
two disclosed documents. Mr Justice Richards was called upon to
decide whether the redactions had been justifiably made.
The
party claiming privilege had explained one of the redactions in issue
that pertained to a question no. 5 on a questionnaire
form as
follows:
As for
question 5, this question does not specifically identify the narrow
question on which the legal department has advised, although
it does
give an indication of material considered by the legal department.
Nevertheless, I believe that if unredacted, question
5 would enable
both the nature of the advice given by the legal department, and the
substance of that advice, to be inferred, and
that this would be the
case irrespective of whether the answer to question 5 is also
unredacted.
The learned judge dealt
with this aspect of the case at para 16-18 of the judgment as
follows:
16.
…
..Mr Railton QC
for [the party claiming privilege] submitted that if the substance of
the advice could be inferred from the redacted
passage, it was a
passage which "evidenced" the substance of the advice for
the purposes of the test set out in
Three
Rivers DC v Bank of England (No.5)
[[2003] EWCA Civ 474;
[2003] QB
1556]
or "revealed"
it (see
The Good
Luck
[
Bank
of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd
(The “Good Luck
”
)
[1992] 2 Lloyds Rep. 540 (QB)]
).
He relied on
Thanki:
The Law of Privilege
at paras 2.54 – 2.57 and particularly:
"The
most obvious of the categories of documents which are not, strictly
speaking, actual communications are those documents
which constitute
secondary evidence of privileged communications."
Mr Railton
submitted that a document from which the advice could be inferred
constituted secondary evidence of the advice.
17.
Save as mentioned
below, none of the authorities to which I was referred deal with the
case of a document which, rather than stating
the substance of
advice, is a document from which it is said the advice can be
inferred. Two considerations lead me to the view
that, unless perhaps
the inference is obvious and inevitable in which case the document is
in substance a statement of the advice
or communication, privilege
does not attach to such documents. First, it is the communication
between the client and lawyer which
is privileged either in its
original form or in a summarised or paraphrased form. A document
which does not contain the communication
in any form contains nothing
to which privilege attaches. Mr Railton's submission that a document
from which the substance of the
communication may be inferred
"evidences" the privileged communication treats "evidences"
as carrying its fact-finding
meaning of "providing an evidential
basis". I do not think that this is the sense in which the word
is used in
Three
Rivers DC v Bank of England (No. 5)
and other authorities. It is used, I believe, in the narrower sense,
consistent with
The
Good Luck
and other
cases, of reproducing, summarising or paraphrasing the communication.
18.
The second
consideration is that inference is usually a matter of subjective
judgment. Save in very clear cases, views may differ
as to whether
the inference can be made. A claim to privilege should not, in my
judgment, depend on a subjective assessment of
this sort. It would,
as Sir Sidney Kentridge QC appearing for the Law Society in
Three
Rivers DC v Bank of England (No.6)
submitted in relation to the issue on that appeal, introduce "an
unwelcome element of subjective uncertainty":
[2004] UKHL 48
;
2005 AC 610
at
630. There are in any case many documents which are clearly not
privileged but from which the substance of legal advice may
be
inferred. A common example is a minute of a board meeting recording
the directors' decision on a particular matter.
[33]
The authority that Richards J singled
out, by way of an exception, in the opening phrase of paragraph 17 of
his judgment was
the judgment of Finn J in the Federal Court of
Australia in
Pratt Holdings Pty Ltd v
Commissioners of Taxation
(2004) 207
ALR, in particular para 20 thereof, which was quoted in the
first edition of Thanki,
The Law of
Privilege
at para 2.57 as follows:
The second
principle which is more directly tied to the protection of
communications is that the privilege extends to any document
prepared
by a lawyer or client from which there might be inferred the nature
of the advice sought or given. Examples include communications
between the various legal advisers of the client, draft pleadings,
draft correspondence with the client or the other party, and
bills of
costs:
Propend Finance
, at CLR
569; ALR 597-8.
The Chancery Division judge
remarked (at para 19) of this passage from the Australian
authority that he did not ‘consider
that this provides a basis
generally for a claim for privilege in any document from which legal
advice may be inferred. Its restricted
application is apparent from
the examples given’. (The learned judge’s reference
to ‘the examples given’,
including bills of costs, falls
to be understood in the context of the prevailing acceptance in
English jurisprudence of the notion
that solicitors’ feenotes
are privileged
per se
– something which I have already
found to be misconceived in principle.)
[34]
Thus, in a case in which parts of a feenote
set out the substance of the privileged communications in respect of
the seeking or
giving of legal advice, or contain sufficient
particularity of their substance to constitute secondary evidence
thereof, those
parts, but not the document as a whole, would be
amenable to the privilege. The privilege should be asserted in
such cases
in precisely the manner that the applicants have sought to
do in the current matter – that is by redacting the information
so as to disclose those parts of the document that are not subject to
the privilege and covering up those that are.
[35]
Whether such an approach could properly be
adopted was controversial in England until comparatively recently,
but it obtained unequivocal
endorsement –albeit obiter - from
the Court of Appeal (per Hoffmann LJ) in
GE
Capital Corporate Finance v Bankers Trust Company
.
[36]
GE Capital
concerned the non-disclosure of allegedly irrelevant material, as
distinct from matter that was alleged to be the subject of legal
professional privilege. But notwithstanding the nature of the
case, the
dicta
of Hoffmann LJ in the cited passage were expressly directed at how
documents that were ‘partly privileged’ should be
treated
for discovery purposes. Mr Justice Rix subsequently followed
GE
Capital
in
The
“Sagheera”
,
[37]
which was a case in which the plaintiffs asserted privilege by
covering up parts of communications between themselves and their
agents that directly or indirectly revealed the dates, provenance,
authorship, or content of privileged material, or information
or
comment on the same.
[36]
In
The
“Sagheera”
,
[38]
Rix J remarked that ‘there might be difficult borderline
decisions’ to be made when privilege was claimed in respect
of
the covering up of parts of documents ‘which do not reproduce
or comment on contents of otherwise privileged material,
but merely
and perhaps only indirectly refer to or reveal “the dates,
provenance [? or] authorship” of such material’.
The test, in my view, however, is whether, upon an objective
assessment, in the sense postulated by Richards J in
Financial
Services Compensation Scheme
,
[39]
the references disclose the content, and not just the existence, of
the privileged material. Approached in that manner, the
scope
for difficulty is not so evident.
[37]
It is now time, applying the principles
just rehearsed, to address the current application. As
mentioned earlier, there is
virtually no detail provided in the
founding papers substantiating why the covered up portions of the
invoices should be declared
to be amenable to the assertion of legal
advice privilege. The basis upon which I am invited to
determine the question is
by taking what is sometimes called a
‘judicial peek’ at the covered up portions; that is by
looking privately at the
redacted parts of the invoices. It is
a practice that has on occasion been adopted in our courts in
circumstances in which
the judge considers it necessary to privately
inspect allegedly privileged documents to make a just decision of a
matter in dispute.
[40]
Historically, the need sometimes arose in the context of the
determination of interlocutory disputes about the right of one
party
to inspect discovered documents in respect of which the other party
had claimed privilege. It entails the judge looking
at material
that is not available to the party against whom the alleged right of
non-disclosure is asserted. That self-evidently
puts the party
that is kept in the dark, as it were, at a disadvantage and it limits
the assistance that a court is ordinarily
able to derive for the
purposes of deciding contentious questions from argument addressed to
it by parties who are equally equipped.
[38]
Statutory provision is made for the
practice in
s 80(1)
of the
Promotion of Access to Information
Act 2 of 2000
. That provision enjoyed attention in the quite
recent litigation between the President and M&G Media Ltd, which
wended
its way from the High Court via the Supreme Court of Appeal to
the Constitutional Court. In the Appeal Court judgment, Nugent
JA commented generally on the concept of taking a judicial peek,
noting that while the practice might properly be availed of in
appropriate circumstances, it was nevertheless important to consider
that courts ‘earn the trust of the public by conducting
their
business openly and with reasons for their decisions’ and that
therefore ‘a court should be hesitant to become
a party to
secrecy with its potential to dissipate that accumulated store of
trust’.
[41]
Those remarks were endorsed in the judgment of the Constitutional
Court,
[42]
which noted, in the context of a review of international
jurisprudence, in particular that of Canada and the United States of
America, that a judicial peek (or as it is referred to in North
America, ‘in camera review’) should be undertaken only
‘as a last resort’, or ‘where absolutely
necessary’.
[43]
[39]
I draw attention to these considerations
because I consider that a party in the position of the applicant in
the current case should
be astute to present its case in a manner
directed as far as possible to avoid the necessity of the matter
having to be decided
on the basis of a secret inspection, or at the
very least to minimise the one-sided effect of any private judicial
inspection that
might nevertheless remain necessary. In the
current case that could have been done by providing a far more
detailed contextual
explanation in its founding papers of the bases
for the non-disclosure of the allegedly privileged information.
A party that
asserts legal professional privilege should generally be
able to provide a rational justification for its claim without
needing
to disclose the content or substance of the matter in respect
of which the privilege is claimed.
[44]
Failing such justification, there is nothing before court but the
claim to privilege itself; the means for testing its validity
is
absent if resort is not had to the mechanism of judicial peeking,
which, as has been noted, a court should generally be hesitant
to
undertake. Indeed, had SARS’s counsel not agreed to my
taking a judicial peek in the current case I might well have
declined
to do so – despite the fact that the application could not be
determined without it - on the grounds of the applicant’s
failure to provide sufficient contextual justification of its claim
to legal advice privilege in its founding papers.
[40]
The need for a party seeking to invoke the
court’s endorsement of the validity of its claim to privilege
in a case like this
to provide sufficient contextual material with
which a court and the opposing party can meaningfully engage was
indeed underscored
by my experience when, after the matter had been
argued, I took up the invitation to privately inspect the redacted
material.
The covered up portions, as expected, contained
numerous references to documents, including documents in the course
of being drafted,
and to a certain entity. The mere references
did not, however, set out the substance of any request for legal
advice or the
content of any advice given. They also did not,
either on their own, or when read in the context of the documents as
a whole,
afford any material that I could identify as providing
secondary evidence by which the content of the privileged
communications
that occurred in the course of the work being billed
for could be inferred. So, for example, the mere mention of a
drafting exercise,
without any indication of the considerations that
informed it, does not, by itself, afford secondary evidence of the
substance
of the privileged communications between attorney and
client. The draft deed itself would no doubt be a privileged
document,
but that does not render another document (brought into
being outside the ‘continuum of communications’ described
in
Balabel
)
that merely suggests its existence, without disclosing its content,
similarly privileged. The applicants have either misconceived
the nature and ambit of their legal advice privilege, or their
failure to provide the context in which they contend for it has
made
its basis impossible to recognise in most of the redacted material.
In the result I have found myself unable to grant
the declaratory
relief sought by the applicant in respect of any redaction where it
has not been sufficiently clear to me on a
reading of the invoices as
a whole that it discloses – either directly, or inferentially -
the substance, as distinct from
the mere occurrence, of a
communication in the continuum of communications entailed between the
applicants and their attorneys
in the seeking or giving of advice.
[41]
I have been able to identify only three of
the redacted passages as qualifying for the assertion of legal advice
privilege.
All three passages appear in tax invoice
no. 6047890, dated 31 July 2008. In each of those
instances I consider that
the information contained in the feenote is
such that the character of the advice sought by the client may be
inferred, in the
sense of conveying not only that advice was sought,
but also the substance of the client’s evident concern in an
identifiable
legal context. The three passages concerned are:
(i) the redacted feenote item dated 21/04/2008 that appears
immediately
below the item, also dated 21/04/2008, which reads
‘
Perused the tracked sale of
shares agreement (tracked by Peter). Accepted the changes and
emailed the clients a copy for their
perusal and comments.
’;
(ii) the partially redacted feenote item, dated either
21/04/2008 or 22/04/2008 (it is impossible to tell which of
the dates
is applicable because of a partial obliteration of the type print
apparently caused by a paper punch), which commences
with the words
‘
Telephone call received from
Werner and Barry to discuss the….
’
and (iii) the redacted portion of the first of the feenote items
dated 23/04/2008, which commences with the words ‘
Peruse
and Consider…
’.
[42]
It remains to deal with the respondent’s
application in terms of
rule 35(12)
read with
rule 30A.
There
is some merit, I think, in the applicants’ contention that
compliance with the respondent’s notice in terms
of the subrule
would negate the very object of the main application. They
would be obliged to disclose documents the very
identity of which
they had asserted had been privileged. More pertinently,
however, inspection of the documents was plainly
not sought for the
purposes of the main application. Were the court to have upheld
the respondent’s interlocutory application,
the documents would
have been made available for inspection only after the parties had
argued the application in the main proceedings.
The purpose of
rule 35(12)
is to give a party access to documentation for potential
use in the pending proceedings, not for some extraneous purpose.
That purpose could not be fulfilled by requiring the applicants to
disclose the documents after argument of the main application.
The interlocutory application was misconceived in my view, and
therefore, to the extent that remains necessary, it will be
dismissed.
It was of little more than nuisance value in the overall
conspectus of the matter and does not warrant a discrete costs order.
[43]
The applicants have enjoyed a measure of
success, albeit that relief is not being afforded in respect of the
vast majority of the
redactions in respect of which they purported to
assert privilege. By the same token, however, the respondent
could also
be said to have been substantively successful because
SARS’s contentions on the ambit of the privilege have
essentially been
upheld and applied in the determination of the
case. In the circumstances I consider that it would be just
that each party
bear its own costs.
[44]
The following orders are made:
1.
The application by the respondent to compel
compliance by the applicants with the notice given in terms of
rule
35(12)
is dismissed.
2.
It is declared that the following portions
of the applicants’ attorneys’ tax invoice no. 6047890,
dated 31 July
2008, are protected from disclosure by reason of legal
advice privilege:
(i)
the redacted feenote item dated 21/04/2008
that appears immediately below the item, also dated 21/04/2008, which
reads ‘
Perused the tracked sale of
shares agreement (tracked by Peter). Accepted the changes and
emailed the clients a copy for their
perusal and comments.
’;
(ii)
the partially redacted feenote item, dated
21/04/2008 or 22/04/2008, which commences with the words ‘
Telephone
call received from Werner and Barry to discuss the….
’;
and
(iii)
the
redacted portion of the first of the feenote items dated 23/04/2008,
which commences with the words ‘
Peruse
and Consider…
’.
3.
Save as provided in terms of paragraph 2,
the application is otherwise dismissed.
4.
Each party is to bear its own costs.
A.G. BINNS-WARD
Judge of the High Court
Date
of hearing:
13 February 2014
Date
of Judgment
17 March
2014
Before:
Binns-Ward J
Applicants’
counsel:
M.J. Fitzgerald S.C.
A.M. Smalberger
Applicants’
attorneys
Cliffe Dekker Hofmeyr Inc
Cape Town
Respondent’s
counsel: A.R.
Sholto-Douglas S.C.
M. Blumberg
Respondent’s
attorneys: State Attorney
Cape Town
[1]
Three Rivers District Council & Ors v. Bank of
England
(No. 6)
[2004] UKHL 48
,
[2004] 3 WLR
1274
,
[2005] 1 AC 610
, at para 10 (per Lord Scott of Foscote);
also reported in the All England Reports as
Three
Rivers District Council and others v Governor and Company of the
Bank of England (No 5)
[2005] 4 All ER 948
(HL).
[2]
[2008] ZACC 13; 2008 (2) SACR 421
(CC); 2009 (1) SA 1 (CC); 2008 (12) BCLR 1197 (CC)
[3]
Thint
supra, at para 183.
[4]
Thint
supra, note 124.
[5]
1988 (1) SA 868
(A) at 885-6.
[6]
[
1983]
HCA 39
,
(1983) 153 CLR 52
,
(1983) 49 ALR 385.
The passage quoted is from para 24 of
Dawson J’s judgment.
[7]
See also Van Niekerk, Van der Merwe
and Van Wyk (in collaboration with Barton),
Privilegies
in die Bewysreg
(1984)
at pp. 28-44 s.v. ‘
Die
Geskiedenis en Grondslae van Regsprofessionele Privilegie
’.
[8]
[1983] 1 All ER 705
,
[1983] QB 878
,
[1982] ECR 1575
,
[1983] 3 WLR 17
(at page 732-733 of the All ER report; also quoted
by Lord Carswell in
Three Rivers District
Council & Ors v. Bank of England
at
para 95).
[9]
Section 46
of the
Tax Administration Act (as
amended) provides:
(
1)
SARS may, for the purposes of the administration of a tax Act in
relation to a taxpayer, whether identified by name or otherwise
objectively identifiable, require the taxpayer or another person
to,
within a reasonable period, submit relevant material (whether orally
or in writing) that SARS requires.
(2)
A senior SARS official may require relevant material in terms of
subsection (1) in respect of taxpayers in an objectively
identifiable class of taxpayers.
(3)
A request by SARS for relevant material from a person other than
the
taxpayer is limited to relevant information related to the records
maintained or that should reasonably be maintained by
the person in
relation to the taxpayer.
(4)
A person receiving from SARS a request for relevant material under
this section must submit the relevant material to SARS at the place
and within the time specified in the request.
(5)
If reasonable grounds for an extension are submitted by the person,
SARS may extend the period within which the relevant material must
be submitted
(6)
Relevant material required by SARS under this section must be
referred to in the request with reasonable specificity.
(7)
A senior SARS official may direct that relevant material-
(a)
be provided under oath or solemn declaration; or
(b)
if required for purposes of a criminal
investigation, be provided under oath or solemn declaration and, if
necessary, in accordance
with the requirements of section 212 or 236
of the Criminal Procedure Act, 1977.
(8)
A senior SARS official may request relevant material that a person
has available for purposes of revenue estimation.
The expression ‘
relevant
material
’ is specially defined in s 1 of the Act to
mean ‘
any information, document or thing that is
foreseeably relevant for tax risk assessment, assessing tax,
collecting tax, showing
noncompliance with an obligation under a tax
Act or showing that a tax offence was committed
’.
[10]
In terms of para 2 of the
notice of motion the relief sought was worded as follows:
[A
declarator]
that the invoices rendered to the Applicants by their
attorneys…, to the extent that such invoices set out the
nature of
the advice sought by the Applicants from their attorneys
and/or the advice given by such attorneys are legally privileged
and,
as such, the Applicants are not required to disclose them to
the Respondent
.
A declaratory
order in those terms would have amounted to little more than a
statement of law in respect of a principle that in
broad terms was
common ground between the parties. When this was pointed out,
the applicants’ counsel submitted a
reformulated prayer for
relief in the following terms:
It
is declared that the redacted portions of the invoices annexed to
this Order marked ‘A’ and ‘B’ are
protected
from disclosure by reason of legal professional privilege
.
[11]
The feenotes concerned had in fact been issued by
Hofmeyr, Herbstein & Gihwala Inc., a firm of attorneys that
subsequently
became part of
DLA
Cliffe Dekker Hofmeyr.
[12]
Similar contentions about waiver of privilege might
conceivably have been raised on the basis of the disclosure to the
third applicant
of the invoices rendered to the first applicant,
but, as that question was not presented, it is unnecessary to
consider the position.
Similarly, it is unnecessary to go into
which of the applicants is able to assert the privilege, as no
challenge was raised by
the respondent to the standing of any of
them.
[13]
See note 1, above.
[14]
Section 80J(1) of the Income Tax Act provides that:
The Commissioner must,
prior to determining any liability of a party for tax under section
80B, give the party notice that he
or she believes that the
provisions of this Part may apply in respect of an arrangement and
must set out in the notice his or
her reasons therefor.
Section 80B of the Act
regulates the tax consequences of ‘impermissible tax
avoidance’.
[15]
Section 42 of
Tax Administration Act
obliges
SARS to inform a taxpayer of the completion of an audit
conducted under the Act.
[16]
The application for declaratory relief had been
instituted on 4 October 2013, before the notices were given by
SARS.
[17]
[1988] 2 All ER 246 (CA),
[1988]
Ch 317.
[18]
At p. 249 of the All England Report.
[19]
At pp. 254-256 of the All England Report.
[20]
See note 1, above.
[21]
The passage in question (which is
the last sentence in para 111 of the judgment) reads:
‘
I
agree with the view expressed by Colman J in
Nederlandse
Reassurantie Groep Holding NV v Bacon & Woodrow Holding
[1995]
1 All ER 976
at 982 that the statement of the law in
Balabel
v Air India
does
not disturb or modify the principle affirmed in
Minter
v Priest
, that all
communications between a solicitor and his client relating to a
transaction in which the solicitor has been instructed
for the
purpose of obtaining legal advice will be privileged,
notwithstanding that they do not contain advice on matters of law
or
construction, provided that they are directly related to the
performance by the solicitor of his professional duty as legal
adviser of his client.’
[22]
In para 1.
[23]
1964 (2) SA 495
(A) at 499E.
[24]
1997 (2) SA 869
(C) at 879G-H.
[25]
See e.g.
Chant
v Brown
(1852) 9
Hare 790
,
Turton v
Barber
(1874) LR
17 Eq 329
and
Dickinson
(t/a John Dickinson Equipment Finance) v Rushmer (t/a FJ Associates)
[2002] 1 Costs LR
128 (Ch.D).
[26]
[1995] 1 All ER 413
(Ch D).
[27]
At p. 419.
[28]
At p. 424.
[29]
[1993] 3 NZLR 209
[30]
[1993] 1 NZLR 152.
[31]
At pp. 158-9.
[32]
See note 25, above.
[33]
See para [16], above.
[34]
Cf. the following statement by the
US Court of Appeals (Ninth Circuit) in
Clarke
v American Commerce National Bank
[1992] USCA9 2643
;
974 F. 2d 127
(9
th
Cir. 1992) concerning legal professional privilege in respect
of the content of lawyers’ feenotes:
‘
Not
all communications between attorney and client are privileged.
Our decisions have recognized that the identity of the
client, the
amount of the fee, the identification of payment by case file name,
and the general purpose of the work performed
are usually not
protected from disclosure by the attorney-client privilege.
See e.g
Tomay
,
840 F. 2d at 1426;
In
re Grand Jury Witness (Salas and Waxman)
[1982] USCA9 2216
;
695 F. 2d 359
, 361-62 (9
th
Cir. 1982);
Hodge
and Zweig
548 F.
2d at 1353;
United
States v Cromer
483 F. 2d 99
, 101-02 (9
th
Cir. 1973). However, correspondence, bills, ledgers,
statements, and time records which also reveal the motive of the
client in seeking representation, litigation strategy, or the
specific nature of the services provided, such as researching
particular areas of law, fall within the privilege.
Salas
,
695 F. 2d at 362. The burden of establishing that the
attorney-client privilege applies to the documents in question rests
with the party asserting the privilege.
Tomay
,
840 F. 2d at 1426.’
Counsel for
SARS also referred me to the opinions of the Supreme Court of New
Hampshire in
Hampton Police Association, Inc. v Town of Hampton
20 A. 3d 994
(2011), 162 NH 7
(which contains a comprehensive review
of other US authority) and of the Supreme Court of Pennsylvania
Middle District in
Levy v Senate of Pennsylvania
65 A. 3d 361
( 2013), which are to the same effect as the passage quoted from
Clarke
.
[35]
[2007] EWHC 2868
(Ch).
The
judgment is accessible at
http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Ch/2007/2868.html
.
[36]
[1995] 1 WLR 172
(CA),
[1995] 2 All
ER 993
(at 996
in
fine
- 997 All
ER).
[37]
Hellenic Mutual War Risks
Association (Bermuda) Ltd and General Contractors Importing and
Services Enterprises v Harrison (The
“Sagheera”)
[1997]
1 Lloyd’s Rep. 160 (QB).
[38]
Note 37
above,
at p.171.
[39]
Note 35
above.
[40]
See e.g.
Lenz Township Co (Pty
Ltd) v Munnick
1959 (4) SA 567
(T) at
574G-H;
Van der Linde v Calitz
1967
(2) SA 239
(A) at 260B;
South African
Football Union and Others v President of the Republic of South
Africa and Others
1998 (4) SA 296 (T)
at 300H-302 and
Mohamed v President of the
Republic of South Africa
2001 (2) SA 1145
(C) at 1150J-1151A.
[41]
See
President
of the Republic of South Africa v M&G Media Ltd
2011 (2) SA 1
(SCA),
2011 (4) BCLR
363
, at para 52.
[42]
President of the Republic of
South Africa v M&G Media Ltd
2012
(2) SA 50 (CC)
[43]
At para 39.
[44]
In
In
re Grand Jury Witness (Salas and Waxman)
[1982] USCA9 2216
;
695 F. 2d 359
, 361-62 (9
th
Cir. 1982) the US Court of Appeals (9
th
Circuit) noted that blanket assertions of privilege (that is without
the provision of an explanation of how the information concerned
fits within the privilege) are “extremely disfavored”.