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Does your divorce need a Confidentiality Agreement?

By August 18, 2020February 23rd, 2024No Comments

Confidentiality agreement: If you are going through a divorce and property proceedings in the family law courts you are probably already aware of your duty of full and frank disclosure of financial information to the other side, but maybe you have concerns over information you may have to share that may need to remain confidential for certain reasons. How do you resolve this apparent conflict? Here’s a brief look at the issues.

The duty of full and frank disclosure of financial information in property proceedings in family court means that certain types of financial documents must be exchanged between parties. This enables the court to get a picture of the true financial position of each party—their income, assets, liabilities, superannuation and financial resources.

But what if some of these documents need to be protected, because the information is private business information, such as company financials and client data that the ‘owner’ of the information needs to be kept secret for commercial reasons? If you have any kind of responsibility to protect proprietary company information, whether as a business owner or employee, then you may be concerned about breaching your obligations if you are forced to disclose such information during your family law matter. What can be done in such a situation?

Duty of disclosure

Parties in financial proceedings are required by law to disclose financial information which are relevant to establishing your financial situation or the issues in dispute. Such disclosure may include confidential business information and documents, for example, business earnings and how earnings may be affected in future.

Here’s a summary of what the family court requires, as per their guidance:

“[The duty of disclosure] requires disclosing all sources of earnings, interest, income, property (vested or contingent interests) and other financial resources. This applies whether the property, financial resources and earnings are owned by or come to the party directly, or go to some other person or beneficiary (for example, the party’s child or de facto partner) or are held in corporations, trusts, company or other such structures. Also required to be disclosed is information about any property disposal (whether by sale, transfer, assignment or gift) that was made in the year immediately before the separation of the parties or since the final separation and that may affect, defeat or deplete a claim.”

You can also view a list of documents that the Family Law Rules have defined as appropriate for parties to disclose to other parties.

Given the scope of the duty of disclosure of financial information, you may legitimately be concerned about disclosing confidential business information or commercially sensitive information in your family law property proceedings.

It may be that you are a business owner, a franchisor or franchisee, in a partnership or joint venture with others. There are plenty of reasons businesses will want to protect their sensitive information—for example, in a situation where a business is being sold and bids and negotiations are underway. Documents relating to such bids and negotiations would want to be kept secret from future bidders, but yet they may be forced to be provided and made public in a family law matter. It’s clear that businesses require confidentiality in order to operate their business, but this can conflict with a party’s duty of financial disclosure.

Or, you may be an employee of a company and need to obtain confidential corporate records to determine details of your income and compensation package. Your employer may have already had you agree to provisions in your employment agreement regarding keeping company information confidential, or they may ask that you put a Confidentiality Agreement in place such that disclosed information is afforded protection. Even if your employment agreement specifies that you can share this information with your lawyer, this is typically a reference to a lawyer who is helping you with your employment matter, rather than a potential family lawyer down the track.

Implicit undertaking on how parties can use your information

Even in the absence of a Confidentiality Agreement or written undertakings, there is an implied undertaking by each party that information provided will only be used for the purpose of the current family law matter. Once information is disclosed, it can only be used for resolution or determination of the relevant dispute, and not for any other purpose.

However, with the serious consequences that may exist for exposing sensitive company information (whether as an employee or business owner), it’s understandable that parties often wish to have stronger protections in place for their disclosed information.

Confidentiality Agreements

It’s possible to ask the other party or their solicitors (and any other relevant professionals, for example valuers) to enter a Confidentiality Agreement with you.

Such agreements make explicit which documents should be seen as confidential and who may have access to them (usually, the parties, their lawyers, the court and other professionals directly involved in the matter, e.g. accountants, financial planners). The agreements usually spell out that the parties acknowledge that any dissemination of the information will cause harm, and what the penalties or consequences will be of disseminating the information.

A Confidentiality Agreement also describes how to dispose of confidential documents on finalisation of a matter, and prevent an ex’s continuing access to their spouse’s information, once the family law matter has been settled.

Undertakings

You could also ask that the other party provide the court with an undertaking not to use any of your disclosed information for purposes other than the current proceeding. They can also undertake to ensure that any other person or entity that they disclose your information to will also provide an undertaking to the court in similar terms.

Injunctions

You can obtain an injunction that restrains the other party from disclosing your information in some circumstances, such as if the other party has made explicit threats to use that information for other purposes.

Speak to your lawyer who will help you understand which disclosed information should be protected. If you are uncertain whether you may be able to request a Confidentiality Agreement, it may still be worth applying as you may indeed have a legitimate reason to protect your disclosed information. As a tool to protect business information and guard against unwanted disclosure, it is worth considering whether a Confidentiality Agreement may be suitable in your circumstances.

If you have any concerns over disclosure of sensitive or confidential business information during your divorce, please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.

Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.

You may also like to view our article on privilege in family law, which is different to confidentiality but shares some of the same principles.

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