SAR-gazing: when is a privilege not a privilege?
The latest decision of the Court of Appeal deals again with the operation of the Data Protection Act 1998 (DPA 1998) in the context of a data subject access request (SAR) served by beneficiaries on trustees.
The judgment concerns two related issues – legal professional privilege (LPP) and joint privilege. LPP is the right of a trustee to claim privilege over legal advice to avoid disclosing that advice in litigation. Joint privilege, in a trust context, concerns the question of whether the trustee and the beneficiaries share in any LPP which applies so that the trustee cannot refuse disclosing to beneficiaries documents over which LPP can be asserted.
This judgment confirms beneficiaries’ continuing rights to joint privilege over documents to which LPP applies, and reverses a decision of the High Court which appeared severely to restrict the ability of beneficiaries to take advantage of joint privilege in the context of SARs. However, as frequently noted by this firm when discussing this case, the new statutory framework put in place by the Data Protection Act 2018 (DPA 2018) has changed the landscape and now provides trustees and their advisers with considerably greater protection and certainty.
Background
This case centres on Ashley Dawson-Damer and her two children, who are beneficiaries of the Glenfinnan Trust, a Bahamian-law trust of which Grampian Trust Company Limited is the trustee (the Trust and the Trustee). The Trust held over $400m in assets before the Trustee appointed almost all of the funds to trusts of which the Dawson-Damers were not within the beneficial class. The disappointed beneficiaries challenged these appointments in proceedings brought in the Bahamas. The beneficiaries sought to support that challenge by serving a SAR under the DPA 1998, which was in force at the time, on the Trustee’s English lawyers, Taylor Wessing (TW). TW did not comply with the SAR to the extent that, as they alleged, the relevant personal information fell within the exemption found in the DPA 1998 which excepted “information for which a claim to [LPP] could be maintained in legal proceedings” (the LPP Exemption).
High Court in 2015
At first instance in the High Court it was held that the LPP Exemption applied to documents which would not strictly attract LPP but which were capable of being withheld by trustees on ordinary trust law principles following a beneficiary request unrelated to any existing breach of trust proceedings (a so-called request “in the air”). These principles include the one derived from the case of Re Londonderry’s Settlements in which the court found that trustees were entitled to keep their reasons for decisions they have made confidential.
Court of Appeal in 2017
In 2017 the Court of Appeal overturned this decision, determining that those principles of trust law should not by themselves enable documents relating to a trustee’s reasons to qualify for the LPP Exemption. Instead, only those documents that would attract LPP in legal proceedings – a much narrower category – could be exempt from disclosure.
High Court in 2019
The case was then referred back down to the High Court to consider (i) whether particular categories of documents attracted LPP under English law; and (ii) if so, whether the beneficiaries had a right to gain access to those documents notwithstanding they were subject to LPP. The main grounds on which the Dawson-Damers sought to do this was to assert ‘joint privilege’ with TW in the documents, such that LPP could not be asserted against them, even if it could be asserted against outsiders to the trust.
On the first question, the Judge found that TW had shown that the relevant documents would attract LPP under English law proceedings.
However, on the second question the court did not find that the beneficiaries could then go behind that privilege, as they had not shown there was a joint privilege in the documents under the applicable law.
In the court’s view, the Trustee’s claim to LPP was to be assessed under the law of the country in which proceedings were being brought (that is, England), but the beneficiaries’ right to joint privilege was to be assessed under the law of the trust. In this case, Bahamian law governed the trust. Statutory provisions in Bahamian trust law effectively remove joint privilege between trustees and beneficiaries in most cases and trustees have wide powers to refuse disclosure. On that basis, the High Court held that the Trustee (and by extension TW) was entitled to withhold from the beneficiaries all documents that attracted LPP under English law.
The judge added in passing that joint privilege would have arisen under English trust law, if he had concluded that English law rather than Bahamian law would have been applicable to the joint privilege question.
The 2020 proceedings
So the parties returned to the Court of Appeal, where the primary issue was the High Court’s finding that TW was entitled to rely on the LPP Exemption as against the beneficiaries of the Trust. In particular, the court was asked to re-consider whether joint privilege could be relied upon by the beneficiaries to obtain access to those documents which attract LPP. For this, the court had to consider the origins of the principle of joint privilege.
Joint privilege
LPP, to which joint privilege will apply, comes in two forms: legal advice privilege and litigation privilege. The documents in dispute here were those that attracted legal advice privilege, which protects a communication between a lawyer and his or her client for the dominant purpose of giving or receiving legal advice.
The question for the Court of Appeal was whether legal advice privilege could be asserted against beneficiaries, or whether there was joint privilege in those documents which meant disclosure to the beneficiaries could not properly be refused.
Joint privilege arises where two parties have a joint interest in the subject matter of the legal advice that is being given or received. Many of the earlier trust cases on this point concern situations in which a trustee took advice on matters relating to the administration of the trust - something in which the beneficiaries would also be interested - and reimbursed himself out of the trust fund for the costs of the legal advice. In these circumstances, a beneficiary was said to have a joint interest in that advice, and so privilege could not be asserted against him or her (though it could against third parties). That means in claims against trustees for breach of trust (where trustees are under an obligation to allow the claimant beneficiaries to inspect relevant documents), LPP cannot be asserted against a beneficiary where such a joint interest exists.
This principle has spread into other areas of law. One example is corporate law, where a company shareholder may wish to inspect legal advice obtained by the directors of the company. Following the trust law position, if the advice is relevant in shareholder litigation against the company, the document cannot be withheld for reasons of LPP.
The parties’ cases
Back in the Court of Appeal in this case, the key question was whether the High Court was correct when it determined that the existence of joint privilege should be resolved by reference to the law which governs the trust.
It was the beneficiaries’ position that the principle of joint privilege was a part of the procedural law of the country in which litigation was underway.
TW’s position was that joint privilege was an aspect of trust law and so ought to be assessed under the governing law of the trust.
The decision
The Court of Appeal agreed with the beneficiaries. It considered the cases on joint privilege, in both the contexts of companies and trusts, and found that, while it may have originated in trust cases, joint privilege falls to be determined under domestic procedural law, rather than the law of the trust. It was persuasive to the court that joint privilege has been recognised and applied on equal principles in contexts other than trusts, such as company law.
In principle, therefore, TW will not be able to rely on the LPP Exemption as against the beneficiaries where joint privilege has arisen under English law. That means legal advice obtained by the trustees before litigation was in view can in principle be obtained under the SAR which the Dawson-Damers made.
What are the implications post-General Data Protection Regulation 2018 (GDPR) and DPA 2018?
Since the LPP Exemption under the DPA 2018 replicates that which existed under the DPA 1998, the court’s interpretation of the LPP Exemption will continue to be relevant. This decision may therefore appear to be something of an incursion into trustees’ rights to withhold sensitive and confidential information from inquisitive beneficiaries.
However, there remain many reasons for trustees not to be unduly alarmed.
First, the decision did not determine whether a particular document qualified for joint privilege. In considering the origins of joint privilege, the court reiterated the two key ingredients of joint privilege: the use of trust funds for the LPP advice and the existence of a joint interest. Trustees may be able to use this apparent affirmation of this case law ‘test’ to avoid a joint privilege arising. For example, a trustee might argue that, in documents wherein a trustee is being advised not to distribute to a particular beneficiary, the respective interests between trustee and beneficiary are so divergent that no joint interest exists.
More generally, under a new exemption introduced in the DPA 2018 lawyers, like TW, are able to resist disclosure under a SAR where the information requested would ordinarily be protected from third parties for reasons of client confidentiality.
Furthermore, Article 15(4) GDPR provides certain parties with an exemption from complying with a SAR where doing so would adversely affect the rights and freedoms of others. This firm has previously discussed how this is potentially a wide-ranging carve-out for trustees who might argue that the rights of the beneficiaries of the trust would be adversely affected by disclosure. This is supported by ministerial statements made during a reading of the DPA 2018, which confirmed that the exception under Article 15(4) would apply to sensitive trust documents which trustees are entitled to withhold under the Londonderry principle.
However, some caution is required as this argument will ultimately need to be tested in court. When that happens, one additional argument could be that the rights of the trustees themselves fall within this exemption. In his concurring judgment in Re Londonderry, Salmon LJ underlined the concerns of trustees and their importance when he said “[i]t might indeed well be difficult to persuade any persons to act as trustees were a duty to disclose their reasons, with all the embarrassment, arguments and quarrels that might ensue, added to their present not inconsiderable burdens.”
In due course, the application of this exemption will undoubtedly receive judicial consideration.
Paper filing system
At the same time, the court also considered a separate issue, namely an appeal by TW against the High Court’s decision that 35 hard copy files that it held were a “relevant filing system” such that they fell within the scope of the DPA regime.
The DPA 1998 (and 2018) capture within their scope all automated processing systems (including computerised databases), as well as certain hard copy filing systems, provided they are structured according to specific criteria relating to individuals and in such a way that enables “easy access” to the personal data.
The Court of Appeal expressed the test which had to be met for documents to be part of a “relevant filing system” as comprising four questions.
- Are the files a “structured set of personal data”?
- Are the data accessible according to specific criteria?
- Are those criteria “related to individuals”?
- Do the specific criteria enable the data to be easily (or “readily” as the DPA 1998 puts it) retrieved?
The Court of Appeal disagreed with the High Court’s conclusion that the 35 files, which were simply arranged in chronological order, were a relevant filing system because personal data were “easily” retrievable on the basis that a trainee and an associate solicitor, under supervision of a senior lawyer reviewing for privilege, could extract the data from them. The Court of Appeal held that the fact it required three legally trained professionals to extract the data demonstrated that it was not “easily” retrievable. It held that what was needed for the file structure itself to enable ready access to the data and endorsed what has become known as the “temp test” – the data should be organised in such a way that a reasonably competent temp without any particular knowledge of the type of work or the documents held would be able to extract specific information.
This decision places limits on the extent to which hard copy files can fall within the scope of a SAR.
Conclusion
This latest battle in the Dawson-Damer saga does provide further clarity but causes the pendulum to swing back in favour of beneficiaries. However, reviewed in the round, there is no data protection-shaped backdoor for beneficiaries easily to obtain the most sensitive trust documents. Not least, the beneficiaries in the Dawson-Damer case itself have a long way to go to obtain copies of the documents they want to see. But in any event, the law has moved on since their SAR was made, and trustees can continue to have confidence that under the new DPA 2018 regime, information which is in their hands and those of their English advisers is well protected, with considerably greater certainty than before.
