Keeping the Fraud in the Family

David Debenham
McMillan LLP

Allegations of fraud are commonplace in family law proceedings, particularly with respect to improper financial disclosure of assets for the purpose of equalization payments. Typically, it is the wife alleging that her husband undervalues assets, or fails to identify assets of the marriage. In such cases the recent result in Chateauvert v Chateauvert, [2018] ABQB 2 (CanLII) is instructive.

In this case the Plaintiff, S, alleged that her former husband, the Defendant, C, withheld financial information from her prior to their execution in the late spring of 1997 of a Matrimonial Property Agreement (“the Agreement”). The information concerned the value of Mr. C’s shareholdings in an oilfield pump company in which he was employed at the time and the potential sale of the company. Approximately four months later, the company was sold resulting in a net return to Mr. C on his shares of approximately $1.9 million, an amount far exceeding the $150,000 value attributed to them for the purposes of the Agreement. Ms. S claimed a 50% interest in the fair market value of Mr. C’s shares at the time the Agreement was executed based on fraudulent misrepresentation and, in the alternative, negligent misrepresentation, breach of fiduciary duty, breach of contract, mistake and unconscionability. Mr. C denied that he was aware of any upcoming sale of the company at the time the parties signed the Agreement, denies that he fraudulently or negligently withheld information about the value of his shares from Ms. Stoddart, and sought dismissal of all of her claims.

The law

Fraudulent misrepresentation consists of four elements: 1. A false “representation” of a matter of fact; 2. Which was knowingly false; 3. Which was made with the intention to deceive the representee; and 4. Which materially induced the representee to act, causing her damage. To prove a fraudulent misrepresentation, it must be established that it was made knowingly, or without a belief in its truth, or with reckless disregard of whether it was true or false.

A “representation” is a statement made by, or on behalf of one person, to, or with the intention that it shall come to the notice of another person, relating to a matter of fact.

A “matter of fact” means either an existing fact or thing, or a past event.

A misrepresentation is a representation which, when made, or if a continuing representation, when acted upon by the representee, is false.

“Falsity” is established when there is a substantial discrepancy between the representation and any material fact it expressly or impliedly purports to state.

For an express misstatement to be actionable in deceit, dishonesty is required.

S was therefore required to establish each of the following four elements on a balance of probabilities: 1. A false representation or statement made by Mr. C; 2. Which was knowingly false; 3. Which was made with the intention to deceive Ms. S; and 4. Which materially induced Ms. St to act, causing her damage.

1. A false representation

An opinion can constitute a fact where the representor knows the facts much better than the representee or failed to investigate the facts giving rise to the opinion. Liability can also arise from silence and incomplete disclosure where there is a duty to disclose, or when the representor determines the original disclosure to be inaccurate or does not ensure it is accurate, with the intent to induce the other party to act.

2. The misrepresentation was knowingly false

It is sufficient to create civil liability that the statements are made with indifference as to whether they are true or false. If the person making the statement shuts his/her eyes to the facts, or purposely abstains from inquiring into them, then an honest belief in the truth of the facts is lacking and the person is as fraudulent as if he/she had knowingly stated that which is false. In the context of matrimonial property negotiations, the onus is on the spouse who declares his/her assets to be accurate to inquire as to their accuracy.

3. The false misrepresentation was made with an intention to deceive

Although not discussed in this case, there must be enough circumstantial evidence to support a finding of fraudulent intent, such as (1) profiting from the error, (2) other errors that result in self-profit (3) inadequate production, maintenance or retention of records; (4) offering implausible or inconsistent explanations of behavior; (5) concealment of documents or attempts to suborn false testimony, or (6) offering false or incredible testimony.

4. The representee was materially induced to act, causing her damage

A lack of due diligence on the part of the victim will not be a defence. Damages arising from fraudulent misrepresentation should be calculated to put the innocent party back in the position he/she would have been had the misrepresentation not been made: The presumption seems to be that if the misrepresentation had not been made, the plaintiff would not have entered into the contract. So the plaintiff ought to be awarded such damages as will put him back in the financial position he was in before the contract was made. This means that where a person is induced by fraud to buy some property, the proper measure of damages is prima facie the difference between the price paid and the fair value of the property.

The Result.

The court found that the first element of the tort of fraudulent misrepresentation, a false representation or statement, has not been established. Ms. St failed to establish that Mr. C had knowledge of an impending sale of the company, and that he withheld that information from her. Therefore, he did not make a false representation by failing to disclose this information.


The forensic investigator must keep a checklist of all the elements that have to be proven, and ensure that there is cogent and convincing evidence to support each element.