A confidentiality agreement, or non-disclosure agreement (NDA), is an enforceable agreement that parties will use private information only for the permitted purpose, and otherwise, keep this information secret. It is not unusual for there to be a confidentiality agreement in a divorce case involving a public figure, celebrity or wealthy person. A central assumption of a confidentiality agreement is that information that is not publicly available or known to the spouse before the divorce should not become known because of the divorce. This article explores the purpose of confidentiality agreements and the consequences of an actual or anticipated breach of the agreement.
The Purpose of a Confidentiality Agreement
Confidentiality agreements list the documents and information that are confidential, describe how these items are identified (for instance, labelled “confidential”), and dictate how these documents must be securely stored (locked cabinets and encrypted electronic files). A confidentiality agreement in a divorce case typically specifies that no person apart from the solicitors, the divorcing couple, the court and any other authorised person may access the information. The parties that are privy to the information must not reveal the information to anyone, not even family members, and particularly not disseminate the information widely to journalists or on social media.
It should be noted that even in the absence of a confidentiality agreement, there is an implied undertaking that parties to a family law matter will only use such information for the purpose it was provided, and broadly to enable a resolution of the matter. In fact, the right to sue for breach of a confidentiality agreement is actually found in common law and not under the contractual agreement. It may provide peace of mind, however, if there is a written document outlining what has been agreed between the parties, and specifying the penalties that will be imposed for a breach of the implicit undertaking. The existence of such an agreement is persuasive evidence to present to a court in a common law case for breach of confidentiality.
It is common for confidentiality agreements to focus on protecting the financial data of the couple. Divorcing spouses have a duty to make a full and frank disclosure of all of their financial assets and liabilities during property settlements in family law courts. This allows the court to gather a true picture of the financial position of each party, including their income, resources, superannuation and liabilities. As such, there must be an exchange of financial documents and information that the parties may not want to be revealed to outside parties.
If one of the spouses is a business owner, then private company financials, and privileged and proprietary information will be circulating amongst the parties to the divorce. There are many legitimate reasons why a business owner would want to keep the finances of the company secret. For example, if one spouse is entertaining offers on their company then these bids would be subject to discovery in the property settlement litigation, but may cause significant financial damage if revealed to the competing bidders. People understandably have reservations about revealing this sensitive information to others, particularly to a former spouse with whom they now have an acrimonious relationship.
The rationale for protecting information such as addresses and phone numbers is less immediately evident, compared to sensitive business information. However, even this information can be subject to a confidentiality agreement, particularly if one or both spouses are celebrities or public figures, where their address and phone number may be kept confidential as a matter of course.
A confidentiality agreement imparts a greater degree of responsibility on the parties beyond mere discretion. There is a presumption that parties will proactively ensure that information is kept secret by securing physical files and protecting electronic databases, and limiting access only to trusted and authorised individuals. The parties to the agreement acknowledge that disseminating the information will bring harm, and tacitly waive their right to dispute this fact in the future.
Types of Confidentiality Agreements
In divorce cases, a confidentiality agreement is usually a mutual agreement, but they may also be a unilateral agreement, where one party has asked the other to maintain confidentiality. The agreement is typically entered into voluntarily, but the Family Court has considered whether it has the power to compel a confidentiality agreement against an unwilling party. The 2008 High Court case of Hearne v Street established that such an order should only be made in exceptional circumstances, and more recent decisions, such as the 2017 case of Milford & Doumas, have upheld this ruling.
Breach of Confidentiality Agreement
If a party breaches a confidentiality agreement without permission then the other party is entitled to obtain relief from the breaching party, and in some cases, from the third-party recipient of the information. The consequences for breaching the agreement are specified in the agreement itself. Remedies for an actual breach may include financial penalties, compensatory damages, a declaration or account of profits. For an anticipatory breach of confidentiality, the court may provide injunctive relief, issuing an order that the party must not reveal the information.
Proving a Breach
A number of elements must be established in order to prove a breach of confidence. The court held in Coco v AN Clark (Engineers) that the shared information must:
- have a “quality of confidence”, that is, be confidential data not readily available to others;
- have been originally conveyed under a circumstance that imports a requirement for confidence; and
- be actually released, or threatened to be released, to the detriment of the plaintiff.
A confidentiality agreement may stipulate the time limit that the secrecy must be maintained. It should also state how confidential documents will be treated when they are submitted to the court, and disposed of once a divorce has been granted. A divorced spouse should not have continued access to their former spouse’s confidential information once the case has concluded. Their solicitor may retain a copy of the financial details on file.
A court will typically enforce a confidentiality agreement, as there is no real justification for revealing the private details of an estranged spouse. If there are matters that you prefer to keep private that will be revealed during a divorce, it is highly recommended that you draw up a confidentiality agreement. Armstrong Legal’s family law experts can help you with this agreement and every other aspect of divorce proceedings. Please contact us on 1300 038 223 or email to make an appointment with one of our family lawyers.
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