Caxton and CTP Publishers and Printers Limited v Novus Holdings Limited

Caxton, a minority shareholder (7.5%) in Novus, served a demand on Novus under section 165(2) of the Companies Act 71 of 2008 to institute legal proceedings against Lebone Litho Printers (Pty) Ltd to have a commission agreement declared illegal and void. The commission agreement related to a public procurement contract between Novus and the Department of Basic Education (DBE) for printing school workbooks. Novus appointed Judge Harms (retired) as an independent and impartial person under section 165(4) to investigate the demand. After receiving the report, Novus declined to commence proceedings. Caxton then applied for leave to bring proceedings in Novus's name. In its answering affidavit in the main application, Novus referred to numerous documents including the section 165(4) report. Caxton served a notice under rule 35(12) seeking production of these documents. Novus refused, claiming the documents were irrelevant, privileged, and confidential. Caxton then brought an interlocutory application under rule 30A to compel production. The high court dismissed the application, holding all documents were irrelevant and the report was privileged. Caxton appealed to the Supreme Court of Appeal.

• Whether documents referred to in affidavits must be produced under rule 35(12) of the Uniform Rules
• What constitutes a 'reference' to a document for purposes of rule 35(12)
• The test for relevance under rule 35(12)
• Whether a report prepared under section 165(4) of the Companies Act is protected by litigation privilege
• Whether privilege was waived by quoting extensively from the report
• The appropriate confidentiality regime when ordering production of commercially sensitive documents
• The nature and scope of the court's discretion under rule 30A

The appeal was upheld with costs, including costs of two counsel. The high court order was set aside. Novus was directed to produce all 11 categories of documents sought within 30 days subject to a confidentiality regime. The confidentiality regime required: (i) Novus to identify confidential documents; (ii) Caxton's attorneys not to disclose confidential documents except to counsel or independent experts; (iii) confidentiality undertakings to be signed; (iv) leave to approach court if confidentiality designation disputed; (v) confidential documents only to be referred to in affidavits by legal representatives or experts. Caxton was ordered to file its replying affidavit in the main application within 20 days after receipt of all documents. Novus was ordered to pay costs of the interlocutory application, including costs of two counsel.

The ratio decidendi is that: (1) Under rule 35(12), where a party makes reference to a document in an affidavit, and that document is relevant (assessed on whether it might have evidentiary value or assist on issues that might arise), and is not privileged and is in the party's possession, it must be produced. (2) The test for relevance under rule 35(12) is broader than under other discovery rules - it is not based on crystallized issues but on whether documents might assist the party seeking production to assess their position and possible defences. (3) Reports prepared under section 165(4) of the Companies Act are not protected by litigation privilege because their primary and overriding purpose is to enable the board to assess the statutory demand, not to obtain legal advice. This interpretation is supported by the wording, context and purpose of section 165(4), particularly section 165(5)(a)(iii) which contemplates court review of such reports. (4) A court may impose an appropriate confidentiality regime to protect commercially sensitive information while ensuring fair trial rights, typically limiting inspection to legal representatives and independent experts.

Obiter observations include: (1) The mere say-so of a litigant that a document is privileged is not sufficient to withhold disclosure - it is the purpose for which the document was prepared that is determinative. (2) A document does not become privileged merely because persons who obtained it subsequently find it desirable to submit it to legal advisors. (3) An appellate court should not interfere with a broad discretion unless the court of first instance exercised it improperly or came to the wrong conclusion. (4) The delivery of a notice under rule 35(12) does not automatically suspend time periods for filing affidavits, but the court has discretion under rule 27 to extend time where a proper case is made. (5) The underlying purpose of discovery is to assist parties and the court in discovering truth and promoting just and expeditious determination of cases. (6) Courts will look favorably on claims to access documents reasonably required to assert or protect rights, as adequate opportunity to prepare one's case is part of the right to a fair trial.

This case provides important clarification on the operation of rule 35(12) of the Uniform Rules regarding production of documents referenced in affidavits. It establishes that: (1) The scope of rule 35(12) is broader than other discovery rules - documents need not satisfy the strict relevance test for discovery under rules 35(1), (3) or (11). (2) Relevance under rule 35(12) is assessed on whether documents might have evidentiary value or might assist in relation to aspects or issues that might arise, not on fully crystallized issues. (3) Section 165(4) reports under the Companies Act are not protected by litigation privilege as their primary purpose is to advise the board on statutory requirements, not to provide legal advice. (4) The court has discretion to impose confidentiality regimes to balance fair trial rights against protection of confidential commercial information. The judgment is significant for derivative action proceedings under section 165 of the Companies Act and for discovery practice generally in South African civil procedure.