Protecting Financial Privacy In Divorce & The Rise In Confidentiality Agreements
In the realm of divorce, one of the most sensitive aspects for high-net-worth clients is the requirement for full and frank financial disclosure.
When it comes to divorce settlements, there is no withholding all of the fine details of each spouse’s personal assets and debts, corporate holdings, foreign investments, ventures, personal and business income and expenditures, personal spending habits, trust assets and beneficiaries.
Almost everyone despises the broad-based financial disclosure that is expected during divorce. Some spouses are especially worried about the financial information being leaked by their spouse.
Although the Family Law Rules provide a modest level of assurance of confidentiality, some spouses rightfully demand a more stringent option of protection. Family Law Rule 20(24) states:
“When a party obtains evidence under this rule, rule 13 (financial disclosure) or rule 19 (document disclosure), the party and the party’s lawyer may use the evidence and any information obtained from it only for the purposes of the case in which the evidence was obtained, subject to the exceptions in subrule (25).”
But what if a spouse disregards that Rule and divulges that financial disclosure to others, family, friends, competitors or even Canada Revenue Agency (CRA)?
Unfortunately, some ex-spouses exploit this disclosure to cause embarrassment or defamation, breaching the assumed confidentiality.
To protect divorcing spouses from unauthorized disclosure of their financial affairs, Confidentiality Agreements, also called Non-Disclosure Agreements, have grown in popularity.
In the 2016 case of Burton v Burton, 2016 ONSC 62 (CanLII), the court stated:
“I have evidence from the respondent that has not been tested through cross-examination that the applicant has discussed this litigation with third parties. While I make no finding at this juncture in the litigation, I must balance the interests of the parties. Consequently, I am ordering that the applicant’s counsel, the expert retained by the applicant and the applicant sign a Confidentiality Agreement not to disclose any information obtained in this litigation and any documentation received in this litigation with any third party. I direct the respondent’s counsel to prepare the Confidentiality Agreement. If there is a problem with respect to the terms of the Confidentiality Agreement, the parties are to contact the trial coordinator to schedule a time to meet with me to resolve this issue.”
Case link:
https://www.canlii.org/en/on/onsc/doc/2016/2016onsc62/2016onsc62.html
More recently, in Jarosz v. Denda, 2024 ONSC 4597 (CanLII), the court stated:
“For this reason, NDAs can provide a family litigant with protection vis-à-vis their contractual obligation of confidentiality to third parties, while permitting such litigants to honour their duty of financial disclosure. They have been ordered in certain cases (Burton v. Burton). The draft NDA prepared by Respondent’s counsel has no offensive or troubling language. There is nothing in it that would prevent the Applicant’s counsel from reviewing with his client information that is disclosed. There is no presumptive penalty or liability imposed for breach, although it is expected that lawyers and experts will honour their commitments in an NDA. It expressly permits the Applicant to share information with other third-party experts the Applicant seeks to retain, provided they also execute the NDA prior to the release of information to them.”
Case link:
https://www.canlii.org/en/on/onsc/doc/2024/2024onsc4597/2024onsc4597.html?resultId=24574c3b653043dab4773b624051073a&searchId=2025-05-01T15:24:34:772/02b93bda27f74aa48f370f27685ae2d9
These Confidentiality Agreements, as recognized in precedents such as Burton v. Burton and Jarosz v. Denda, serve as contractual protections of privacy. They affirm the spouses’ commitments to keeping disclosed financial information confidential, thereby preventing its dissemination to third parties without authorization. These agreements, crafted in divorce cases, typically outline several critical provisions:
Scope of Confidentiality: Clearly defining what constitutes confidential information and the permissible use of such information within the confines of the divorce case.
Non-Disclosure: Prohibiting parties and their legal representatives from disclosing confidential information to unauthorized third parties, unless explicitly permitted by the agreement.
Enforcement Mechanisms: Confidentiality Agreements can impose automatic penalties for breaches, but before that, they underscore the ethical and legal obligations of confidentiality of all parties involved. It is understood that legal professionals and experts should honour their commitments to confidentiality.
Exceptions and Permissible Disclosures: Allowing for disclosures to other authorized experts or professionals involved in the case, contingent upon their agreement to abide by the terms of the Confidentiality Agreement.
Confidentiality Agreements have become pivotal in maintaining the privacy and dignity of high-net-worth spouses involved in family law disputes. They offer reassurance that their personal financial information will not be exploited beyond the divorce court, mediation or arbitration. Moreover, these agreements reinforce the ethical standards expected of legal professionals, fostering an environment of trust and procedural fairness.
Of course, nothing provides a higher level of privacy than Mediation/Arbitration for divorcing spouses, as privacy is the cornerstone of that dispute resolution process, as opposed to the public court system, where the financial disclosure is available to any person, once filed.
Steve Benmor, B.Sc., LL.B., LL.M. (Family Law), C.S., Cert.F.Med., C.Arb., FDRP PC, is the founder and principal lawyer of Benmor Family Law Group, a boutique matrimonial law firm in downtown Toronto.
He is a Certified Specialist in Family Law, a Certified Specialist in Parenting Coordination and was admitted as a Fellow to the prestigious International Academy of Family Lawyers.
Steve is regularly retained as a Divorce Mediator/Arbitrator and Parenting Coordinator. Steve uses his 30 years of in-depth knowledge of family law, court-room experience and expert problem-solving skills in Divorce Mediation/Arbitration to help spouses reach fair, fast and cooperative divorce settlements without the financial losses, emotional costs and lengthy delays from divorce court.