Confidential Relationships (Preservation) Law (2009 Revision)

Introduction

Confidentiality of business dealings is strictly observed in the Cayman Islands.1 It is governed by both the common law and statute.

At common law, the general equitable duty of confidentiality applies to information coming to the knowledge of a person in circumstances where it would be unconscionable for the recipient to disclose it (Attorney General v Observer Ltd [1990] 1 AC 109).

This short memorandum is concerned, however, not with the common law but rather with the statutory provisions of the Confidential Relationships (Preservation) Law (2009 Revision) ("CRPL" or "the Law").

Background

The CRPL was enacted in 1976 to protect the privacy of legitimate business relationships and strike a balance between confidentiality and acceptable levels of transparency.

The CRPL codified the common law duty of confidentiality owed by a bank to its customer and further extended the obligation to other professional relationships including financial services business generally.

The Law criminalises any breach of the duty of confidentiality which is not in accordance with the provisions of the CRPL.

Extra-territoriality

Section 3(1) of the CRPL states that the Law has application to all confidential information with respect to business of a professional nature which arises in or is brought into the Islands and to all persons coming into possession of such information at any time thereafter whether they be within the jurisdiction or thereout.

Prohibited disclosure

Section 5 of the CRPL states that whoever being in possession of confidential information however obtained divulges it (or attempts, offers or threatens to divulge it) or willfully obtains (or attempts to obtain) confidential information is guilty of an offence and liable on summary conviction to a fine of five thousand dollars and to imprisonment for two years. Furthermore, anyone who receives or solicits a reward for so doing is liable to double the penalty and forfeiture of the reward.

In Re K,B (E) and B (P) (Grand Court: Smellie J, 24 November 1997) the Grand Court illustrated its willingness to enforce these provisions. The Court did not permit the use of information received from a bank in breach of the CRPL as evidence in proceedings overseas (notwithstanding that the receiving party had committed no offence by so receiving it). Smellie J, as he then was, held that to permit further use of the material would have the effect of enforcing an illegal transaction and also cause the receiver of the information to breach section 5(3) of the CRPL (as the holder of confidential information making use of it without consent of the principal). On this basis, the Grand Court ordered the return of the documents and the destruction of all copies held by the person who had received the information.

"Confidential information"

It is to be noted that section 3(1) only prohibits disclosure of "confidential information."

"Confidential Information" is defined as "information concerning any 'property' which the recipient thereof is not, otherwise than in the 'normal course of business', authorised by the 'principal' to divulge".

This means that:

1. Information given by or to a professional person acting within the "normal course of business" is not defined as confidential and its disclosure is therefore not prohibited; and

2. Information given with the implied or express consent of the principal is not "confidential" and is therefore permissible.

   In Gippetti v Cayman National Bank 2006 (CILR Note 32) the Grand Court ruled that in circumstances where the principal requests the holder of the information to disclose the information to himself, the holder cannot be in breach of the Law, notwithstanding that the principal might be asking for the information in order to pass it to a foreign revenue agency. Significantly, however, the principal must not have been compelled to request the disclosure of the information by an order of the court for this would...