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In some cases, a spouse may seek the production of documents from a non-party. This can raise confidentiality concerns, as family law litigants need to meet their financial disclosure obligations while still respecting the confidentiality of third-party information. The deemed undertaking rule governs conduct between parties and provides assurances that information disclosed is used only for the litigation. But third parties who disclose their information may seek additional safeguards.
Wife Seeks Disclosure From Third-Party Companies
In V.A.D. v. C.E.W., the wife sought an order for financial disclosure from the husband and three non-party privately held corporations. The companies were run as a family business, and the husband owned shares in those companies. It was clear that the husband had not made a comprehensive financial disclosure. Consequently, the wife brought a motion claiming the requested disclosure from the companies was relevant and necessary to ascertain the husband’s income and his ownership and value in the companies. The companies agreed to provide the wife with most of the documents she sought only if she (and her lawyers and third-party consultants) signed a non-disclosure agreement (“NDA”). Yet, they did object to disclosing post-separation financial statements and tax returns, claiming that those documents were irrelevant and constituted an overreach into their private business.
The wife objected to signing the NDA as a condition of disclosure. Instead, she agreed to an order that mandated her compliance with the Family Law Rules concerning the confidentiality of documents exchanged during the litigation, which she believed would assure the companies that their information would be protected.
The judge began by noting that the requesting party on a non-party disclosure motion needs to “demonstrate that the documents are necessary, relevant to the proceeding and that it would be unfair not to produce them”. In this case, the companies’ shareholders were family members and were bound by a Unanimous Shareholders’ Agreement that included a confidentiality clause. But the companies were worried that financial disclosure without an NDA could expose confidential and commercially sensitive information. Justice Robertson agreed that it was reasonable for the company to maintain the privacy of its commercial and financial information and not want such documents to be public or freely distributed.
Companies Propose Recipients Sign NDA Before Making Disclosure
The companies were concerned that their private information would be shared with a law firm, where they would have no control over who might access it. It was suggested that the NDA include the wife’s lawyers because the company would not be familiar with the law firm’s internal systems and the firm’s other clients, or whether confidential information might be accessed by a lawyer for a competitor, or other entity with which the company did business. But the companies did not require the husband or his advisors to sign an NDA and were satisfied with the internal controls in place at the accountants and law firms that represented the husband. Justice Robertson concluded that the concern about the information being shared with unknown individuals could be managed without the need for an NDA, as this was “an issue of file management and professional codes of conduct”. The judge suggested the parties could describe their conflict checks and client information safeguards to ensure documents would not be shared with competitors.
The judge determined that the wife met her onus to establish that the disclosure was relevant, necessary, and should be produced. Overall, it would be unfair if her case had to proceed without the requested disclosure. Both the husband and the wife were required to comply with Rules 20(24) and (25) of the Family Law Rules, which pertained to the confidentiality of documents exchanged during the litigation. The judge explained that the obligation to protect the companies’ privacy should be mutual and include the husband in his personal capacity. The judge considered Santilli v. Piselli. That case explained that the test for disclosure of a document from a non-party in Rule 19(11) is an objective one, and that mere suspicion or conjecture will not be sufficient grounds to obtain a production order from a third party.
Additionally, the relevance of the requested documents must be such that a court would conclude that it would be unfair for the requesting party to conduct their case without the papers. Essentially, without the production of the documents, the party would be unable to “conduct their case in a manner that would result in a just determination”. In this instance, the wife sought post-separation corporate statements and tax returns to ascertain the husband’s income for support purposes. The judge agreed that without production of the documents, the wife would be unable to respond to the case or reach a just determination of the issues.
Family Law Rules Include Measures to Protect Information
The companies relied on Jarosz v. Denda. That case examined the deemed undertaking rule under Rule 20(24) of the Family Law Rules. The Rule imposes an obligation to keep information confidential and ensures that litigants who obtain information only use it for the case in which the evidence was obtained. However, in that case, the judge explained that the deemed undertaking rule is a promise between the parties to the litigation. But the judge suggested that “it provides little assurance for third parties” and those who have contracted with a family law litigant, where information “may include trade secrets, industry-specific confidential information, or other commercially sensitive information”. Additionally, the judge noted that the Rules permit some exceptions to the deemed undertaking rule, which means that it may not always suitably protect third-party information. In that case, the judge felt that NDA’s can help litigants meet their confidentiality obligations to third parties while allowing them to meet their duty of making financial disclosure.
But in V.A.D. v. C.E.W., Justice Robertson noted that family court is open to the public, and that the husband “engaged this privacy/disclosure tension when he initiated an Application in the Court system, intended to facilitate open and transparent proceedings”. However, the judge believed that an order identifying the parties by initials would protect the companies while still satisfying the open court principle. The judge also acknowledged that an NDA was ordered in Jarosz. However, in that case, the respondent had already provided significant financial disclosure; in contrast, the husband had done very little to comply with his disclosure obligations.
Similar issues were examined in Cherkassova v. Cherkassov. There, the judge emphasized that full and frank financial disclosure is a central obligation in family law, which extends to financial information, including any interest in corporate entities. Moreover, failing to disclose information hinders parties from achieving a fair resolution of issues.
Judge Finds Wife Would Be Prejudiced Without the Information
The parties were also at an early stage in the litigation. Consequently, the judge noted that the documents were relevant at this stage to enable the wife to make informed decisions. Still, they may no longer be applicable at the time of an eventual trial, at which point they would not be filed. But for now, the parties needed professional advisors to conduct valuations. The judge pointed out that the husband failed to provide the value of his business interests and that the wife may need the opportunity to test the assumptions used by his valuator. Additionally, the judge noted that financial disclosure would help the parties clarify the issue. The judge went on to stress that confidentiality needs to be balanced with fairness in the litigation process, but that “disclosure is not publication”.
It was now two years post-separation, but the husband had still not completed his financial disclosure. The judge accepted that it was the husband’s delay in valuing his assets that required the wife to bring the motion for disclosure from a non-party. And the judge agreed that the wife would be unfairly prejudiced if she did not receive meaningful disclosure. The husband and the companies were ordered to produce the corporate documents within 21 days. The judge noted that both parties’ lawyers, financial advisors, and business valuators would separately be bound by their professional governing organizations.
Additionally, neither party was permitted to file with the court any financial disclosure provided by the companies without first providing the companies at least 30 days written notice of their intention to do so, so that the companies could request an order that confidential information be redacted or sealed.
Consider Alternative Dispute Resolution Methods
The Family Law Rules provide that parties will maintain the confidentiality of documents exchanged during litigation. Since courts can grant an order for non-parties to produce documents relevant to the case, these third parties can have their confidential information disclosed. However, there are ways for courts to protect such information short of requiring the recipients to sign NDAs. Parties may also consider alternative dispute resolution processes outside of court to further maintain their privacy.
Johnson Miller Family Lawyers: Helping You Secure Your Interests in Complex Financial Disclosures
Navigating the tension between necessary financial disclosure and third-party confidentiality requires a sophisticated legal strategy. Whether you are seeking transparency from a spouse’s corporate interests or protecting sensitive business data from overreach, Johnson Miller Family Lawyers has the experience to guide you through the complexities of the Family Law Rules. Our team will advocate for your right to a fair financial determination, ensuring that professional standards and court protections are leveraged to safeguard your private information. To discuss your matter further or arrange a consultation, please contact Johnson Miller Family Lawyers at 519.973.1500 or complete our online questionnaire.
