Transcontinental Trusts International Forum 2017 Highlights Data Protection Concerns

About Fozeia Rana-FahyFozeia Rana-Fahy

Fozeia Rana-Fahy is a Director in the firm’s litigation practice group. Ms. Rana-Fahy practices in the areas of civil and commercial litigation and is an accredited mediator.

Fozeia Rana-Fahy’s full profile on mjm.bm.

The Transcontinental Trusts International Forum 2017 took place earlier this month on 4-5th May 2017 at the Fairmont Southampton. This conference began in Bermuda in 2015 and has grown hugely in popularity as one of the key events on the private client calendar. This year it was attended by leading international experts, lawyers and barristers from the international and local private client market as well as renowned international judges. The whole event received an extremely favorable response from speakers and delegates alike. Topics covered included the impact of Brexit and the US election on the industry, practical consequences flowing from CRS & FATCA, an international litigation update, family governance and tax changes in the US and UK. Furthermore, data protection was highlighted in several of the sessions as an area to look out for.

On that note, the recent February 2017 English Court of Appeal decision of Dawson-Damer & Ors v Taylor Wessing LLP is significant for the trust professionals. The background to this case is the ongoing litigation in the Bahamas in which the beneficiaries of Bahamian trusts are challenging the validity of certain appointments made by the trustee. Under Bahamian legislation, a trustee cannot be compelled to disclose certain trust documents. The claimant beneficiaries therefore made a subject access request under the UK Data Protection Act 1998 (“the DPA”) to Taylor Wessing LLP (“Taylor Wessing”), the legal representative of the trustee.

Taylor Wessing took the position that the data was exempt from disclosure under Schedule 7, para 10 of the DPA, which states that “Personal data are exempt from the subject information provisions if the data consist of information in respect of which a claim to legal professional privilege could be maintained in legal proceedings” (“the Exemption”).

At first instance, the judge held that (i) the legal professional privilege exemption was to be interpreted so as to include all documents in respect of which the trustee would be entitled to resist in the Bahamian proceedings; (ii) it was not reasonable or proportionate to expect Taylor Wessing to carry out a search or to determine which documents were privileged; (iii) he would not have exercised discretion under Section 7(9) of the DPA to order disclosure as the beneficiaries’ application for the documents was not a proper use of the DPA.

On appeal, it was found (i) that the Exemption only applies to a claim which would be recognized in legal proceedings in the UK. It does not extend to privilege under any other system of law. Nor does it extend to documents which are not covered by privilege but are subject to rules of non-disclosure (eg. a trustee’s right of non disclosure). The DPA does not provide for such a wide exemption; (ii) a solicitor seeking to rely on the Exemption must show what it has done to identify personal data and the relevant plan of action. Taylor Wessing had not done this and as a result no particular step could be identified as disproportionate; (iii) a request under the DPA would not be invalid if made for the collateral purpose of assisting with litigation. The discretion under section 7(9) was general – it was better not to seek to limit it in any particular way. The purpose of the DPA is to confer rights on data subjects and not to administer a trust. Nothing in the DPA limits the purpose for which data may be used.

Although this case was fact-specific and has now been remitted to the Chancery Division for consideration of further issues falling outside the scope of the appeal, such as privilege in specific documents, it raises serious concerns for trustees as it effectively opens a back door for allowing disclosure previously prevented under the Londonderry principle. So, for example, a disgruntled beneficiary may use a request under data protection laws to obtain letters of request or documents which detail confidential trustee decision making.

This case is of relevance to Bermuda trust professionals as Bermuda’s Personal Information and Protection Act 2016 (“PIPA”) is expected to come into full force in 2018. PIPA does not mirror the wording of the DPA precisely but does confirm that the Act will not apply so as to affect legal privilege. The findings of Dawson-Damer case may prevent reliance on the legal privilege exemption where beneficiaries seek to obtain trust documents from a trustee’s lawyer. It should be noted that there will be limitations to what a beneficiary could successfully obtain via an application for access to personal information under PIPA. PIPA only pertains to personal information. There is therefore no specific obligation to provide the full document in which the information resides. Nor would a trust professional have to disclose documents which would unavoidably require provision of information regarding third parties.

The final stage of the Dawson-Damer case may provide further clarification on this matter but Bermuda based trustees would be wise to consider how they are practically impacted by the provisions of PIPA and to ready themselves for potential applications by beneficiaries (and potentially others) for access to personal information.

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