In general, the law relating to confidentiality in Bermuda follows that of England'. Other than in the few specific circumstances mentioned below, there is no statutory provision in Bermuda defining the extent of the duty of confidentiality owed by fiduciaries or profession advisers to their clients, or when such duty applies or when it may be waived or disregarded.
A duty of confidentiality will exist where information is imparted on the understanding that the information is confidential and is not to be disclosed except in limited circumstances. Relationships between banker and customer and lawyer and client are well known examples where such an understanding will be inferred'.
The Tournier case is authority for the principle that, at least in the context of a banker customer relationship, confidentiality covers all information acquired about a client. A breach of the duty can give rise to a claim for damages and/or an injunction to prevent potential disclosure. However, there is some comfort for trustees to be drawn from the English case of Finers v Miro concerning disclosure (notwithstanding solicitor/client confidentiality) by a solicitor for the purpose of obtaining directions from the Court, where the true ownership of assets held by the solicitor was in doubt, and a possible criminal element was suspected.
DISCLOSURE REQUIREMENTS
Trusts And Companies
Trusts are in a somewhat unusual situation in terms of confidentiality. Where a trust is created in the ordinary course, the settlor might reasonably expect that a duty of confidentiality would exist in his favour as between himself and the trustee. But once the trust exists, the trustee has a paramount duty to beneficiaries (of whom the settlor may or may not be one). The settlor, as such, in the absence of specific statutory provision or by the imposition of an express obligation, will have no rights over the trustee with regard to confidentiality. On the contrary, should the settlor be acting as protector and if his powers in that capacity are fiduciary, they will be held for the benefit of the beneficiaries who may well be able to demand disclosure of information from him.
The Hague Convention of Trusts has been adopted by Bermuda and, ,here Bermudian law is chosen by the settlor as the governing law sub-sections 7(g) and (j) of the Trusts (Special Provisions) Act 1989 will apply:-
7. The (governing) law specified by (section 6 of) the Act governs the validity of the trust, its construction, its effects and the administration of the trust, and in particular governs:
- (g)the relationships between the trustees and the beneficiaries including the personal liability of the trustees to the beneficiaries; and
- (h)the duty of trustees to account for their administration.
In Bermuda there are no requirements to register trusts or to file accounts with any authority. Except as noted below there are no statutory provisions imposing obligations of secrecy on a trustee or requiring disclosure of trust information to any person.
1.See the Editorial and Forum articles in [1992] 3JIntP 119,1221.
2.See Rules 15 to 18 of the Bar Association Rules as follows:
15. A barrister shall hold in strict confidence all information
acquired in the course of his professional relationship with his
client and he must not divulge any such information unless he is
expressly or impliedly authorised to do so by his client or is so
required by the law. He may, however, unless expressly forbidden
by the client, disclose such information to other members of his
firm and to such employees of the firm as may be necessary.
16. A barrister shall not disclose that a particular person has
consulted or retained him unless the nature of the matter
requires such disclosure
17. A barrister shall not disclose to one client the confidential
information concerning or received from another client and he
must decline employment which might require him to do so. When
two parties employ the same barrister communications passing
between either party and the barrister, in his joint capacity,
must be disclosed to the other party.
18. Notwithstanding the above paragraphs, a barrister may be obliged
to reveal information about a client's affairs in order:
to establish or collect his fees;
to defend himself, an associate or an employee in any civil,
criminal or disciplinary proceedings;
to prevent the commission of crime; or
to obey an order of the court.
3. Tournier v National Provincial and Union Bank of England [1924] 1 KB 461.
4. [1991] 1 All ER 182
PURPOSE TRUSTS AND DISCLOSURE
A Bermuda purpose trust does not have beneficiaries (other than, in some cases, on termination). However, the (mandatory) "enforcer" is likely to have similar information rights to those of beneficiaries. This might be perfectly acceptable to a settlor, who is likely to choose a trusted advisor as enforcer.
The trustee must maintain in Bermuda copies of the purpose trust deed (and any supplementary deeds) and a register with details of the settlor, the purposes, the enforcer and annual financial statements. These records are not available for public inspection but can be inspected by the Attorney General and by the enforcer. Whether or not the enforcer is entitled to other documents is untested.
COMPANY OWNERSHIP
The Bermuda Monetary Authority ("the Authority") and the Ministry of Finance require to know the identity of beneficial owners of the shares of Bermuda companies prior to incorporation, and seek Bank introductions.
A company's certificate of incorporation, its memorandum and articles, its capitalisation and any charges affecting its property are recorded in and open to public inspection at the Company Registry. Nominee shareholders and "professional" directors other than the beneficial owners may be chosen so that the names disclosed on a search of the registry give no clue as to the identity of beneficial owners.
A company must make available at its registered office in Bermuda the share register and the register of officers and directors.
In circumstances of oppression, under the Companies Act 1981, minority shareholders can apply to the Court for such order as the Court thinks fit, including disclosure of company books and papers. Similarly, when an offence under the Companies Acts is suspected, the Attorney General apply to the Minister of Finance for a direction for the inspection of company records.
TRUST COMPANIES
Under the Trust Companies Act 1991, it is the duty of the Authority to supervise trust companies. These must, each year, file a certificate of management, financial statements and an auditor's report relating to their activities. The Authority may require other information for the purposes of verifying these matters. The Minister of Finance may appoint an inspector to examine the books and records of a licensed trust company. However, access by either the Minister of the Authority to individual accounts is only permitted upon order of the Supreme Court. Very compelling proof that access is in the public interest is required. Application can be made ex parte.
Under the Trust Companies Act 1991 an order has effect notwithstanding any obligations of secrecy, save the very important exception in the case of lawyer/client communications.
DISCLOSURE UNDER COMPULSION
U.S. Tax And Exchange Of Information Treaty
Bermuda is a party to a treaty with the United States relating to mutual assistance on tax matters. The Government of Bermuda may be asked to provide information for the assistance of the United States Government in enforcing U.S. laws relating to serious crime and the prevention of tax fraud.
There are powerful privacy safeguards. The U.S. authorities are required to state the tax period in question and show that the request relates to a U.S. person or to U.S. fiscal laws. Except in cases of criminal tax liability and tax fraud a senior official of the U.S. Treasury must certify the information to be relevant. The Minister may then order the delivery of information to him within (normally) 28 days. After delivery to the Minister there is a mandatory waiting period of 20 days prior to actual disclosure to the U.S. authorities. During this time any "aggrieved person" may apply to the Supreme Court for judicial review. A fiduciary is not prohibited from immediately advising his client of any order for disclosure.
Where any information is provided in good faith by a fiduciary in Bermuda under the Treaty, there is an absolute defence to any claim for breach of confidentiality.
The Bermuda Government has specifically stated that the object of the treaty is not to act as watchdog or investigator for the Internal Revenue Services. On the few occasions the Treaty has been invoked, the disclosure of information has, as far as the author is aware, been consented to (albeit resignedly rather than enthusiastically) by the clients. Precise information in respect of numbers of cases and results is hard to obtain because, of course, it is confidential.
LETTERS OF REQUEST (LETTERS ROGATORY)
Bermuda is party to the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters. The English Evidence (Proceedings in other jurisdictions) Act 1975 was extended to Bermuda by the Bermuda (Evidence) Order 1987 allowing the Supreme Court in Bermuda jurisdiction to make orders requiring persons (including fiduciaries) to provide documents and give oral testimony in foreign proceedings involving civil or commercial matters. See also Evidence Act 1905 (Bermuda). A similar power exists under the Extradition Act 1870 in relation to criminal matters.
There are limitations to the procedure. It cannot be used to support "fishing expeditions" and an application must be limited to specific documents or information. Orders will be made in respect of criminal cases only where proceedings ha-,e been instituted and this precludes, for example, orders being made in connection with a U.S. grand jury investigation.
There has been very little discussion of these provisions in the Bermudian Courts. One recent case (pre-dating the Bermuda/U.S. Treaty) is, however, indicative of the Court's approach. In General Electic Company et al v The United States of America the respondent (U.S.) had obtained an order from a judge of the Supreme Court, pursuant to a request for international judicial assistance, to have recorded evidence of witnesses resident in Bermuda, and for the production of certain documents, to prove the establishment of a fund to bribe public officials in Puerto Rico. Upon appeal, the Court of Appeal held' that:
(1)in the interest of comity it is the duty of the Court in Bermuda to assist the requesting court and the Bermudian court should not examine the circumstances of the case with excessive particularity;
(2)whereas jurisdiction in civil matters derives from the Foreign Tribunals Evidence Act 1956 (UK), jurisdiction in criminal matters derives from the Extadition Act 1870;
(3)the request is not an act of state but a request under the Rules of the Supreme Court, and executive assistance is sanctioned under 0.37 r. 60, which provides for the transmission of the documents by the Governor to the Supreme Court;
(4)the production of banker's books to a foreign court is not contrary to s.59 of The Evidence Act 1965 or The Bermuda Monetary Authority Act 1969;
(5)confidentiality cannot be used as a screen for the concealment of crime;
(6)the documents requested should be identified with sufficient particularity.
TRANS-NATIONAL PROCEEDINGS - RECENT TRENDS
Increasingly, requests are being made by third parties (especially from the U.S.) to, for example, banks with a branch or parent in one country, for confidential information held in the branch or subsidiary in another country. The U.S. SEC and the IRS have taken an aggressive stance in several other offshore jurisdictions by (usually) issuing a subpoena on a U.S. Head Office, branch or affiliate of, e.g., a bank for information held by the overseas branch or subsidiary. This leaves the bank (as in the well known Bank of Nova Scotia case) in the invidious position of having to choose between being in contempt of the U. S. Court or breaching its duty of confidentiality in the overseas jurisdiction. Substantial daily fines may be imposed on the U.S. entity pending compliance.
Though untested in Bermuda, it is likely that a Bermuda court would follow English law and regard each separate branch or subsidiary of a bank or trust company as an independent entity and, if situated in Bermuda, to be governed by Bermuda laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
