On Friday, the High Court handed down a landmark decision with positive results for the legal industry and the offshore trustees instructing them (Dawson-Damer v Taylor Wessing  EWHC 1258 (Ch)).
This is the third decision from the English Court in this case and finally answers the ongoing tussle between the competing interests of confidentiality between a trustee and a beneficiary, and data protection.
The decision is a necessary clarification that trustees can rely on the specific exemption which provides that personal data also subject to legal advice privilege can be withheld, and crucially, that the privilege between a trustee and its legal adviser can only be pierced by a beneficiary if the governing law of that trust allows it.
This is a significant improvement following the Court of Appeal’s decision in February 2017, which created uncertainty in the trust industry.
To recap on the background, Ashley Dawson-Damer is the beneficiary of a Bahamian-law discretionary trust (the Trust). She and her two adult children (the Claimants) served Subject Access Requests (SARs) on Taylor Wessing, as the English solicitor to the Bahamian trustee of the Trust (the Trustee).
There are ongoing proceedings for breach of trust in the Bahamas between Mrs Dawson-Damer and the Trustee. Taylor Wessing declined to provide the information requested in the SARs, relying on the legal professional privilege exemption in paragraph 10 of Schedule 7 to the Data Protection Act 1998 (DPA 1998) (the LPP Exemption). The Claimants challenged this and Taylor Wessing was successful at first instance. The Claimants then appealed.
In February 2017, the Court of Appeal found that the LPP Exemption only applies to information which would attract LPP as a matter of English law. To the extent the judge at first instance suggested that it also exempted information which would be protected from disclosure under Bahamian law, he was wrong.
Taylor Wessing could not refuse to provide information on the basis that any search for non-LPP material would require disproportionate effort. A search does not need to be exhaustive, but solicitors relying on the LPP Exemption must evidence that they have carried out a reasonable search of their files.
Further, the Court of Appeal remitted three issues for determination by the Chancery Division:
- Whether information within the scope of the SARs held by Taylor Wessing, other than in electronic form, met the requirements of section 1(1)(c) of the DPA 1998. The issue here is whether Taylor Wessing was required to search its paper records for information responsive to the SARs.
- Whether any data within the scope of the SARs falls within the scope of the exemption at paragraph 10 of Schedule 7 to the DPA 1998. The issue here is the extent to which Taylor Wessing can withhold information from the Claimants on the basis of the LPP Exemption.
- Whether and the extent to which Taylor Wessing can rely on section 8(2) of the DPA 1998 in response to any of the SARs. The issue here is whether it would involve disproportionate effort for Taylor Wessing to be required to carry out any more work, including further searches for responsive information, to respond to the SARs.
Departing from a long standing Court of Appeal decision (Durant v Financial Services Authority  FSR 573), the Deputy Judge concluded that Taylor Wessing's paper files held on behalf of the Trustee under a generic client description, and arranged in chronological order, are a ‘relevant filing system’ for the purpose of the DPA 1998.
He considered that the Court of Appeal authority had been decided before the right to the protection of personal data was enshrined as a fundamental EU right. Since then, the perspective is different and the focus is on the need for protection of the data subject, as opposed to the burden on the data controller.
The Deputy Judge concluded that going forward the approach of the CJEU in re Tietosuojavaltuutettu (Case C-25/17) must now be followed when construing the relevant EU Directive.
Durant is authority that there must be a structured referencing mechanism and means of readily indicating whether and where in an individual file, specific criteria or information about the data subject can be readily located.
The Deputy Judge found that this was inconsistent with re Tietosuojavaltuutettu and unduly restrictive. In applying that approach to Taylor Wessing's paper records, he found that, as the client is recorded as the Trustee, those records relate to trusts in which at least Mrs Dawson-Damer is a potential beneficiary, and that description of the files is a criterion which allows access to personal data.
Furthermore, the Deputy Judge found that personal data could be "easily retrieved" because the files in question are arranged in chronological order, and that further, a page turning exercise through those 35 paper files to locate personal data was not unduly onerous. However, permission to appeal on this issue has already been granted.
The Deputy Judge found that Taylor Wessing is fully entitled to withhold personal data on the basis that the communications attract legal advice privilege. He accepted that when the Trustee, as Taylor Wessing's client, instructs Taylor Wessing to provide legal advice, those communications are subject to LPP as a matter of English law and cannot be waived by Taylor Wessing on its client's behalf.
It was the First Claimant's case that such privilege was a joint privilege between a beneficiary and trustee under English law. That being so, while the Court of Appeal had ruled categorically that the LPP Exemption did not extend to cover material which was covered by LPP under Bahamian law, it had not considered whether there was any aspect of Bahamian law that affects the entitlement of a beneficiary to claim joint privilege and, therefore, prevents the normal application of the LPP Exemption.
Whether a beneficiary has a joint privilege is a matter for the governing law of the trust. In this case, the relevant provisions under s83(8) of the Bahamian Trustee Act prescribed that a beneficiary of a Bahamian law trust has no automatic right to see the legal advice and the Trustee has the right to withhold this.
Consequently, no joint privilege can exist and the beneficiary cannot prevent reliance on the relief provided for by the LPP Exemption. Taylor Wessing was not seeking to rely on a foreign species of privilege here, but it was the First Claimant that needed to do so to overturn the privilege.
This success is an important and positive finding for the trust industry as a whole, in light of the perceived position left hanging by the Court of Appeal's decision and should allay foreign trustees' concerns regarding maintaining LPP in legal advice sought (and subsequently held) in England.
The effect of this decision is that the English Court has closed the door on beneficiaries using a SAR to obtain information which under the governing law of the relevant trust would be protected by LPP.
Issue 3 The Deputy Judge made a number of findings specific to the facts and held that further searches needed to be carried out to discharge Taylor Wessing's obligations under the DPA 1998 and certain searches did not.
The most striking example was the finding that Taylor Wessing is now required to conduct a targeted search for documents (and thereafter for personal data therein, if so applicable) which had themselves been referred to in documents already disclosed because they contained the Claimants' personal data.
The Deputy Judge referred to these as the cross-referenced documents. This finding results in the exercise of the search for the data subject's personal data moving towards an exercise akin to that carried out in litigation disclosure.
While the DPA 1998 has been repealed and replaced by the Data Protection Act 2018 (DPA 2018) and all SARs issued since the coming into force will be governed by the DPA 2018, so far as the LPP Exemption, the DPA 2018 has simply replicated it.
Friday's decision is very positive news for trustees and a much welcome clarification for those advising them from the UK. It rebalances the landscape in terms of the LPP Exemption. Trustees can take comfort in the fact that when claiming legal privilege, whether or not a beneficiary can pierce that privilege, is a matter for the governing law of that trust.
Therefore, seeking advice in the UK does not open offshore trustees up to an increased risk with regards material subject to legal advice privilege.