Chateauvert v Chateauvert, 2018 ABQB 2
Couples going through a separation—whether married or not—must typically resolve financial and property issues. Ordinarily, this involves exchanging financial disclosure.
The very recent decision of Chief Justice M.T. Moreau in Chateauvert v Chateauvert, 2018 ABQB 2 is a significant example of why careful exchange of full financial disclosure is critical in a separation. The Chateauvert case can be summarized very briefly: a husband who had failed to disclose the impending sale of his company to his ex-wife during their separation was found liable to her for half the increased value of his shares in the company twenty years after they signed a separation agreement. The financial consequences to the husband were significant: judgment for the ex-wife in the amount of $307,576, tens of thousands of dollars of pre-judgment interest, the cost of hiring a lawyer for 13 days of trial and, potentially, the husband being on the hook for the wife’s entire legal bill.
Mr. and Mrs. Chateauvert had separated in 1995 after an 8-year marriage. They both hired experienced family lawyers shortly after their separation to assist with dividing their very significant matrimonial property. Very early into the marriage, Mr. Chateauvert had purchased shares in a company which sold pumps for use in the oilfield. On June 10, 1997, the Chateauverts signed a separation agreement where they attributed a value of $150,000 to Mr. Chateauvert’s shares in that company. Four months after the separation agreement was signed, the company was sold with a net return to Mr. Chateauvert on his shares in the amount of $1.9 million.
The Court founds against Mr. Chateauvert on the basis that he had failed to properly investigate the value of his shares and to provide this information to Mrs. Chateauvert before signing the separation agreement, despite the fact that Ms. Chateauvert had inquired about the value of the shares while the parties were negotiating their separation. More specifically, Mr. Chateauvert failed to obtain and disclose a copy of the company’s most recent financial statements. He had also provided a sworn statement of his assets shortly before he and Mrs. Chateauvert signed their separation agreement, but left the value for the shares in the company blank. Chief Justice Moreau found that Mr. Chateauvert had breached a legal obligation to make better inquiries about the value of the shares and to provide this information to Mrs. Chateauvert before executing the agreement.
It is important to note that Chief Justice Moreau found Mr. Chateauvert liable despite believing his evidence that he was not aware of the company’s impending sale. As such, this case is a clear statement that a spouse who is merely careless or fails to make reasonable inquiries about his or her own circumstances—but not does intentionally withhold information known to him—can suffer tremendous consequences years, even decades down the road. The case also illustrates that diligent and painstaking efforts must be made to disclose all relevant information in the disclosure process.
It is important for parties to be aware of this case, particularly when negotiating property settlements that involve privately held corporations. There is no room for guesswork or speculation in respect of values on corporate assets or security, and such informal valuations can lead to great harm to the party engaging in such conjecture. Chateauvert is an absolute example of the importance of providing full, frank, and accurate disclosure when negotiating a separation.