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Steinhoff, secrecy and the Supreme Court of Appeal — a win for public interest access

Steinhoff, secrecy and the Supreme Court of Appeal — a win for public interest access
Dario Milo
By Dario Milo
10 Dec 2024
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The SCA’s decision in the Steinhoff case is a critical affirmation of the importance of transparency where corporates or their senior executives go rogue. The case is also a reminder that — quite unusually in the world — South Africa’s access to information laws extend beyond government bodies to those in the private sector.

The judgment was worth the wait. 

Six months after the hearing of Steinhoff’s appeal, the Supreme Court of Appeal (SCA) in early December handed down its ruling compelling Steinhoff’s successor companies to hand over a forensic report Steinhoff commissioned into South Africa’s biggest corporate scandal. 

Once a darling of the Johannesburg Stock Exchange, Steinhoff became a corporate pariah with its share price dropping over 98% and R200-billion being lost, and its former chief executive officer, Markus Jooste, reportedly committing suicide in the face of criminal charges relating to the scandal. Its former chief financial officer, Ben la Grange, pleaded guilty to fraud in October and was sentenced to 10 years in jail, with five years suspended. 

The legal story begins seven years ago, when Deloitte, the auditors of Steinhoff in the Netherlands, identified accounting irregularities in Steinhoff’s books and refused to sign off on its annual financial statements. Steinhoff acted swiftly: it released an announcement on the Stock Exchange News Service (Sens) that Pricewaterhouse Coopers (PwC) had been appointed to conduct an independent forensic investigation into the accounting irregularities. It also told the market that Jooste had resigned with immediate effect.

PwC gave Steinhoff its report in March 2019 – a light read of 4,000 pages with 3,000 pages of annexes. 

Steinhoff promptly published an 11-page “overview” of the report to the market. The bombshell was that former executives in the Steinhoff group structured and implemented various fictitious and irregular transactions for some years which had created a falsely inflated picture of the profits and asset values of the group.

Request for access


Equally promptly, Arena, the publisher of the Financial Mail, requested access to the full 7,000 pages of the report under our freedom of information law – the Promotion of Access to Information Act (Paia). 

The Financial Mail’s then editor, Rob Rose – also the author of Steinheist, the definitive book on the scandal – and Warren Thomson, then a journalist at the Financial Mail, rightly demanded access to all the gory details of the country’s largest corporate fraud. The overview – explosive at it was – was the tip of the iceberg. Arena was joined by amaBhungane, which filed its own Paia request.

Steinhoff refused both requests, citing a single ground of refusal under Paia: the PwC report was legally privileged. It argued that the report was commissioned on its instruction by its attorneys, Werksmans, to provide legal advice in contemplation of litigation. It therefore should remain secret. 

The Financial Mail and amaBhungane then brought a high court application. Steinhoff’s defence of legal privilege was rejected by the Western Cape High Court – resulting in the appeal by Steinhoff to the SCA. 

The media’s principal argument in the appeal was the one the high court upheld – that there was no evidence that the PwC report was subject to legal privilege. The media also argued that Steinhoff had waived the privilege by publishing the overview with the report’s conclusions. 

On either basis, Steinhoff must be compelled to deliver the report. 

Public interest override


The media added an additional string to its bow: that Paia’s public interest override applied, so that even if the PwC report was legally privileged and that privilege had not been waived, the public interest in the publication of the report outweighed the arguments for keeping it secret.

The time for getting a date for the SCA hearing was approaching when the case took an unexpected turn. Out of the blue, Steinhoff said it had new evidence: expert evidence that the General Data Protection Regulation (GDPR) – which regulates data protection in Europe – would be breached if the PwC report was disclosed. Steinhoff contended that the PwC report contained reams of personal information and that its European lawyers had advised that disclosure in South Africa would breach the GDPR. 

This was a hopeless legal rabbit hole which caused several months’ delay and forced the media to source their own data protection expert to counter the evidence put up by Steinhoff.

Judge Ashton Schippers for a unanimous SCA dismissed Steinhoff’s data protection detour, reasoning that evidence is only admitted on appeal exceptionally – and Steinhoff, a well-resourced and lawyered-up litigant, should have raised this argument in the high court as an additional possible ground of refusal under Paia. Moreover, “it cannot be said that the evidence is weighty, material and likely to be believed” not least because the opinion comes from Steinhoff’s own South African and Dutch lawyers, not an independent expert. Plus the media’s expert – a King’s Counsel specialising in data protection law – disagreed with the application of the GDPR on the facts of the case. 

“Fundamentally”, said Judge Schippers, “whether the report should be disclosed is required to be decided under South African Law – the Paia…. This Court cannot apply foreign law – the GDPR – to limit the effect of the Paia”. 

The SCA then dealt with the substance of the appeal. All three of the media’s arguments succeeded.

First, the PwC report was not legally privileged. The SCA confirmed the two requirements for litigation privilege – that the document must have been commissioned for the dominant purpose of obtaining legal advice, and litigation must be pending or contemplated as likely. But neither of these requirements were satisfied: the purpose of the PwC investigation was the investigation of accounting irregularities to enable Steinhoff to produce its financial statements for 2017 and 2018, with no hint of any litigation pending or contemplated. 

It mattered not that PwC was appointed by a law firm or that the engagement letter was titled “privileged in contemplation of litigation”. 

This was the end of Steinhoff’s case to keep the report secret. 

Privilege waived


But the SCA went further. It said even assuming the report was privileged, Steinhoff had waived this privilege when it published a summary of the report. The overview informed the public of the massive fraud that had been perpetrated within the group. Having disclosed the summary of the report, the public is entitled to the full report.

Even assuming privilege existed and hadn’t been waived, said the SCA, the public interest override applied. The public interest override is Paia’s balancing mechanism – even if a record is protected (for example if it is legally privileged), the requester will still get access if the public interest favours disclosure.

The disclosure of the PwC report would reveal evidence of a substantial contravention of the law: “The irregular transactions and the manner in which they were perpetrated and concealed by the wrongdoers for nearly a decade, are clear indications that they were committing fraud on a large scale”. This was a “classic case where the public interest in the disclosure of the report clearly outweighs any potential harm to Steinhoff”. 

The SCA’s decision is a critical affirmation of the importance of transparency where corporates or their senior executives go rogue. The case is also a reminder that – quite unusually in the world – South Africa’s access to information laws extend beyond government bodies to those in the private sector. 

As the SCA held in an earlier case granting access to records held by ArcelorMittal to the Vaal Environmental Justice Alliance, “corporations operating within our borders, whether local or international, must be left in no doubt that … in circumstances such as those under discussion, there is no room for secrecy and that constitutional values will be enforced.”

Similarly, companies and government bodies should appreciate that litigation privilege for forensic reports is not there for the taking – our courts will interrogate claims to privilege by a laser-sharp focus on contemporaneous documentation. The privilege only attaches where the dominant purpose was to use the report for legal advice where there is existing or contemplated litigation – and simply interposing a law firm to commission the investigators, and labelling the report “privileged”, will not hold water. 

Finally, the SCA has for the first time flexed its muscles in applying the public interest override. In the near quarter century since Paia was enacted, this override has been applied in only a handful of cases –most recently, in the Health Justice Initiative’s successful high court application for access to Covid 19 vaccine contracts held by the department of health – and so it is gratifying to see it work its magic. 

The public interest override means that even where secrecy is usually required – for example in cases involving national security, privacy, commercial confidentiality, tax records and legal privilege, that is not the end of the inquiry. The private or government body holding the information must still consider whether the public interest override applies. Cases like Steinhoff show the potency of the public interest override where there is a good argument that the public has a right to know. 

As for the PwC report, unless an appeal to the Constitutional Court is lodged by Steinhoff, the report must shortly be given to amaBhungane and Arena for their festive season reading. DM 

Dario Milo is a partner at Webber Wentzel attorneys, adjunct professor of law at Wits University and a member of the High Level Panel of Legal Experts on Media Freedom. He acted for Arena and amaBhungane in the Steinhoff case. 

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