Applications to disclose confidential information are not themselves automatically confidential.
Cayman Islands companies owe common law duties of confidentiality to their clients. Following the repeal of the Confidential Relationships (Preservation) Law in June 2016, there is no longer criminal liability for breach; but the risk of damages, and injunctive relief, remains.
The Confidential Information Disclosure Law (the "CIDL") provides for the circumstances in which confidential information may be disclosed to third parties without a breach of that duty. One of those circumstances is where a person intends or is required to disclose confidential information in evidence within any proceeding within or outside the Cayman Islands – in such circumstances the CIDL requires that person to make an application to the Grand Court for directions (a "Section 4 Application"). Disclosure of confidential information in line with those directions is not a breach of confidentiality and is not actionable under Cayman Islands law.
In the Grand Court case of In re Safeguard Management Corp, a Section 4 Application had been made for directions whether information confidential to a trustee and its management company should be disclosed in an LCIA arbitration.
What makes this case interesting is that the counterparty to the arbitration sought the disclosure of the materials produced by the trustee and its management company within the Section 4 Application, including the supporting affidavits, skeleton arguments and hearing transcripts.
The trustee argued that Section 4 Applications are, by their very nature, confidential, and so all materials produced therein should also remain confidential. The counterparty disagreed, submitting that such applications should not be treated any differently to other civil proceedings in the Cayman Islands, that save in exceptional circumstances justice is to be administered in public, and that it makes no difference to that principle whether the proceedings are held in open court or in chambers.
The Grand Court (Parker J) held as follows:
- Section 4 Applications are not by themselves to be treated as having been held in private, even when the Judge hears the application in chambers.
- There is nothing within the CIDL to suggest that anything other than the confidential information subject to the Section 4 Application should remain confidential, and certainly no support for the proposition that the entire application process should be "cloaked in secrecy". This would run contrary to the principle of open justice.
- There is therefore no automatic rule prohibiting information concerning matters raised in Section 4 Applications through affidavits, exhibits, written arguments, transcripts etc. being referred to outside of the application.
- There may be circumstances in the context of Section 4 Applications where such information is so confidential that it needs to be protected from wider dissemination and use. In those cases, it is open to any party to apply for an order that all or part of the court file be sealed and/or evidence be given in private. Such an application must be based on a specific ground or exception that would justify it as being necessary for the administration of justice.
As a result of this decision, anyone making a Section 4 Application should be under no illusions that the application itself will automatically be confidential.
Advance consideration should therefore always be given to whether it is necessary to protect the confidentiality of the application materials themselves, and not just the underlying information.