Confidentiality agreements play an important role in protecting sensitive information in family law matters across Australia. These agreements, otherwise known as non-disclosure agreements, are enforceable contracts between parties. Parties agree not to reveal certain confidential information and use it only for the stated purpose. This article explains the purpose of these contracts and the penalties for an actual or anticipated breach of a confidentiality agreement.
Confidentiality of financial information
Under the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, the parties in a family law matter must make full and frank disclosure of their financial information. This enables the court (the Federal Circuit and Family Court of Australia or the Family Court of Western Australia) to gain a true picture of each person’s income, assets, financial resources, liabilities, and superannuation. Given the scope of the duty of disclosure during a property settlement matter, some of these documents may contain private business information. Certainly, there are legitimate reasons why a business owner may wish to protect the details of their company finances. For example, they may be receiving offers to purchase their company, and it may cause significant financial damage if the competing bids are publicly revealed.
Understandably, some people have reservations about revealing sensitive information during a family law matter, especially to a hostile former spouse. In cases involving public figures or individuals with high net worth, there are greater risks for invasion of privacy and reputational damage. Confidentiality agreements can shield parties in a divorce or other family law matter from unwanted publicity and media intrusion.
Implicit undertaking
There is an implied undertaking in family law matters that information provided during disclosure will only be used for the current proceeding, to resolve the matter, and not for any other purpose. However, it is understandable, given the serious consequences that can result from revealing sensitive information, that a party might wish for greater protective measures.
As a result, it is relatively common for one party in a family court proceeding to request an undertaking from the other party not to disclose private information for unauthorised purposes. One option is to request the other party to sign a confidentiality agreement. In family law matters, a confidentiality agreement is usually a mutual arrangement, in which both parties are protected from breaches of confidentiality. However, there is no legal requirement for this mutuality, and a confidentiality agreement can be unilateral, where one party asks the other to maintain confidentiality and provides some other inducement in consideration, such as a payment.
Duty of confidentiality
A confidentiality agreement imparts a greater responsibility on the parties to proactively protect confidential information, and limit access to only authorised individuals. In signing the agreement, the parties acknowledge that spreading the information will cause harm, and as such they tacitly waive their right to argue to the contrary in the future. The agreement should document which information is confidential and specifically state any exceptions for those who may have access to the information (usually restricted to the parties themselves, their solicitors, the court, and other relevant professionals such as accountants). The parties agree not to reveal the information to anyone, not even close family, and particularly not to widely disseminate the information to the public.
A confidentiality agreement can act as a deterrent to the other party and any third party assisting with the case to stop them from releasing confidential and commercially sensitive information. The agreement typically specifies the consequences and penalties that will result from disseminating the information in an unauthorised fashion. A confidentiality agreement usually also specifies how any documents containing the confidential agreement should be disposed of once the family matter is finalised.
Refusal to enter into confidentiality agreement
If a party to a family law proceeding refuses to make an undertaking or sign a confidentiality agreement, the court is unlikely to compel them. However, the court does have an interest in protecting the confidentiality of the family law process. It is possible for a party to a family law matter to obtain an Injunction to restrain a party from disclosing information, especially if they have made explicit threats to use the material for illegitimate purposes. However, under Hearne v Street [2008], the court has found that an order compelling compliance should only be made in exceptional circumstances.
In the case of Milford & Doumas [2017], the husband asked the court to order his wife to sign a confidentiality agreement to formalise the undertaking she had already made not to pass confidential documents to a third party. The husband claimed that the documents he provided contained confidential information about his business and third parties, which were not publicly available, and were commercially sensitive and would prejudice his interests if they were disclosed to his competitors. The husband brought the application because he claimed his wife had revealed confidential information to her neighbour. The wife opposed the husband’s application on the grounds that while she had sought general business advice from her neighbour (due to his extensive business experience), she had not provided financial documents to any unauthorised party. The judge ultimately dismissed the husband’s application on the basis that there were no exceptional circumstances and any breach of confidentiality by the wife leading to a decrease in the value of the business would be detrimental to the wife’s own interests.
Breach of confidentiality
If someone breaches a confidentiality agreement, then the other party is entitled to obtain relief from the person committing the breach, and in some cases, from the recipient of the information. For anticipatory breaches, that is, threats to reveal information, the court can provide injunctive relief, ordering that the party does not disclose the information. The remedies for an actual breach are usually specified in the agreement, and typically include financial penalties, compensatory damages, an account of profits, or a declaration.
If you have concerns over the disclosure of confidential or sensitive business information during a family law proceeding, please phone Taylor Rose on 1800 491 469. Our team can help with any family law matter.
