Financial disclosure is a pivotal obligation in family law matters. Proper disclosure provides a foundation for the parties to resolve financial issues, while a failure to disclose causes delay and impedes the resolution of issues. Third parties may also be subject to disclosure obligations as legislation enables courts to compel disclosure of information from non-parties, where relevant information is in a non-party’s control, and it would be unfair for the case to proceed without the information being made available. Third parties are particularly likely to face disclosure requests where their interests in a case are aligned with one of the parties. 

Courts can Compel Third Parties to Provide Information 

Both parties involved in divorce proceedings must disclose certain information to each other. In some circumstances, one party might seek information which is in the control of a third party. Where a spouse controls a corporation, and their income information is necessary to determine the amount of child support that should be owed, the Federal Child Support Guidelines (the “Guidelines”) are clear that the payor spouse must provide corporate documents. Section 21(1)(f) of the Guidelines explains that these documents may include the corporation’s three most recent taxation years, the financial statements of the corporation and its subsidiaries, and a statement containing the salaries, payments, or benefits paid to persons or corporations that are not at arm’s length. 

Discretionary Orders Under the Family Law Rules

Even where a spouse does not control a corporation, further provisions enable courts to order documentary disclosure from non-parties. Rule 19(11) of the Family Law Rules states that if a document is in a non-party’s control and is not protected by privilege, and further, if it would be unfair for the party to proceed without the document, then a court may order the non-party to produce the document. 

Rule 20(5), under which a court can order a non-party to disclose information where: 

1. It would be unfair to the party who wants the disclosure to carry on with the case without it;
2. The information is not easily available by another method; and
3. The disclosure will not cause unacceptable delay or undue expense.

The burden is on the party requesting the disclosure to establish that it would be unfair for the matter to proceed if they did not obtain the requested information. In Himel v. Greenburg, Justice Spies highlighted that the Family Law Rules are discretionary; therefore the court must consider the interests of all concerned parties while being mindful that the objective is to “resolve matters in the least contentious, least litigious manner possible.” In Matthys v. Foody, it was held that the purpose of Rule 19 allowed a party to make a formal request for the third party’s sought-after documents, with the expectation that reasonable requests would be granted. 

Requesting Party Must Demonstrate They Require Information Held by Non-Party

When a party to litigation is self-employed or a shareholder of the company they work for, personal income tax returns will likely be insufficient to prove their income. The self-employed or shareholder party will be obligated to provide further information, which often extends to include the financial information of any company to which a party is a shareholder, officer, or director. 

The relevance of a document alone is insufficient to require its production. It is up to the judge to determine whether it is unfair to the requesting party for the case to proceed without the document. In Himel v. Greenberg, Justice Spies found that family courts had largely adopted the factors to be considered in determining whether the production of documents should be ordered from non-parties under the Rules of Civil Procedure. In this matter, the applicant sought documents relating to the valuation of her spouse’s interest in a family business. The non-party corporation provided a valuation report which their auditors prepared, however it argued that it would not be unfair for the applicant to proceed without other requested documents as there was no reason to believe the valuations were not bona fide and independently prepared. 

The judge found that the requested documents were critical to the applicant’s case and were central to the material issue of the respondent’s net family property. Without the requested documents, the applicant would have to accept the valuation prepared by the corporation’s auditors without being able to test the valuations. The judge rejected the corporation’s argument that it could meet with the applicant to answer questions about the valuations instead of making formal disclosure. The judge held that without the information, the applicant could not have any meaningful discussions. Because the respondent’s family owned the corporation, its interests may have been aligned with the respondent in the litigation. Therefore, formal disclosure was preferred. 

Employment May be Used to Shield Income

Weber v. Merritt was a case which involved litigation centred on the respondent husband’s income and support obligations. The applicant sought financial disclosure from a company that the parents of the respondent jointly owned, and also asked for an order that the respondent’s father attend for questioning. The company had declined to produce the requested disclosure voluntarily. 

The respondent had operated his own company which he left to become an employee of his parents’ company. The applicant argued it would be unfair if her case proceeded without having an opportunity to obtain disclosure from this company. She suggested that the respondent’s “employment” was an attempt to shield income. The respondent’s father objected to disclosing private information his son had no interest in, as an employee. 

Courts Weigh Whether Third Party May be Aligned with a Party in the Family Litigation 

The applicant brought her motion under Rule 20(5) which allows a court to order a non-party to be questioned or to disclose information. Here, Justice Madsen looked to Hagey-Holmes v. Hagey for guidance, which held that this approach made sense in matrimonial litigation where spouses or family members might be used to shield income or assets that might be relevant in support or equalization issues. It is not uncommon for family members and their businesses to align themselves to support and protect a family member facing a property or support claim. Nevertheless, disclosure in the family law context must account for privacy and proportionality with the interests of third parties balanced against the interests of the parties to the proceeding. 

The judge found that the requested information was relevant and material to the litigation and that it would be unfair to the applicant to proceed without disclosure and questioning, given the inconsistent statements by the respondent and his father. These requests were not anticipated to cause unacceptable delay or undue costs, therefore the request was appropriate in the circumstances. 

Contact the Family Lawyers at NULaw in Toronto for Advice on Litigation and Third Party Disclosure Requests

At NULaw, our family lawyers understand the challenges that can accompany a separation or divorce, particularly regarding property division and financial disclosure. Our team works to help clients resolve their issues while ensuring that their interests and assets are protected throughout dispute resolution and the litigation process. To find out more about how we can assist, contact us online or call our office at 416-481-5604.