Distributing Family Assets to Pay for Litigation

November 9, 2017
Louise Lam

Inspired by a recent Financial Post article about the court’s ability to require one spouse to pay the other’s legal expenses, this post discusses another way that family law in British Columbia levels the playing field between spouses to increase access to justice.

In many relationships, one spouse has greater control of the family finances and assets than the other.  Because of his or her limited ability to pay for a lawyer or other alternatives such as mediation, the spouse with less control over family finances is often discouraged from proceeding with a divorce or separation.

Luckily for those individuals, family law in BC contains remedies to correct this power imbalance.

Interim Distribution Remedy

Under section 89 of the Family Law Act, a spouse may apply to court for an order for interim distribution of family property to provide money for the following purposes:

To fund family dispute resolution, such as mediation, To fund all or part of a family law action, and To obtain information or evidence in support of a family dispute resolution or an application to court, such as paying for an expert to value the other spouse’s business interests. 

These court orders can be made as early as at the commencement of an action if the statutory requirements are met. 

The Statutory Requirements

The spouse seeking an order for interim distribution of family property must satisfy two requirements under s. 89:

1.       The spouse needs the funds for one of the three purposes set out above and

2.       The interim distribution would not be harmful to the interests of the other spouse.

To establish need, the spouse applying for the order will have to provide proof of:

In the 2014 case of L.(M.A.) v. L.(N.A.) 2014 BCSC 203, the court made an order for interim distribution of cash from one spouse to the other to fund the litigation when the applicant spouse was able to demonstrate a disparity in their incomes and that the parties would otherwise proceed to trial in very unequal circumstances if the order was not made.

As for whether an interim distribution would not be harmful to the other spouse’s interests, this is a question of fact which varies case by case. 

The court will look first at the family property in question, since different family property attracts different considerations. 

For instance, if the spouse is seeking a draw from the other spouse’s business, the court will look at the financial status of the business, whether it has sufficient funds to continue its operations after the distribution, and how will it affect the other spouse overall if there is an interim distribution. 

In Negus v. Yehia 2015 BCSC 857, Ms. Negus a sought a $200,000 interim distribution from Mr. Yehia’s businesses to fund her legal costs.  Mr. Yehia opposed the application citing the challenges to generating such funds from his businesses.  The court found that given that the businesses had an approximate value of $39 million with liabilities of approximately $10 million, it would “not be harmful” to Mr. Yehia to order an interim distribution even though it may be commercially inconvenient or awkward for him to generate the funds.  

Sale of Family Property

Another equalizing remedy is found in Rule 15-8 of the Supreme Court Family Rules, which allows a spouse to make an interim application for an order for the sale of family property as a way to fund his/her legal expenses. 

The Legal Requirements

The spouse seeking an order under Rule 15-8 must show that the sale of family property on an interim application is necessary or expedient

Expedient means advantageous to both parties and not just one.  Necessity, however, can be demonstrated for one spouse only.

Some of the factors the courts have considered on Rule 15.8 applications are:

1.       Whether the sale can promote early settlement.

2.       Whether the sale will defeat a spouse’s claim for an unequal division of family property.

3.       Whether the sale of the property is inevitable – ie neither spouse has the ability to purchase the other’s interest in the home.

4.       Whether the order would put a spouse and children homeless pending resolution of the litigation.

5.       Whether there is alternative accommodation available.

6.       Whether the proceeds of sale would fall entirely to creditors.

Do you need help levelling the playing field so that you can resolve your family law issues? Contact me today to discuss your options.

Louise Lam
Louise Lam
Lawyer (Vancouver)
Connect Family Law

Whether advising on family law or estates matters, Louise has a unique ability to connect with people. Naturally empathetic, thoughtful and attentive, she puts her clients at ease, letting them know that their legal issues are in good hands.