MacLean Law’s family property interim distribution team is delighted with the new and more liberal rules to help level the family law litigation playing field. Why should a couple’s assets all be tied up before trial when each has a default equal entitlement to the gain on excluded property and all the equity of family property. Family Property Interim distribution is controlled by section 89 of our new Family Law Act. Our highly rated and highly experienced BC family property interim distribution team can explain these rules to you. Delay or procrastination never helps in a family law case. Don’t wait to understand your rights.
BC Supreme Court’s Madam Justice Ballance recently decided the new rule on family property interim distribution is more flexible than previous rules under the Family Relations Act and she explains the purpose of the new family property interim distribution provisions:
[186] I turn next to the claimant’s application under s. 89 of the FLA for the release to her of $100,000 out of the family property.
[187] Section 89 reads as follows:
89 If satisfied that it would not be harmful to the interests of a spouse and is necessary for a purpose listed below, the Supreme Court may make an order for an interim distribution of family property that is at issue under this Part to provide money to fund
(a) family dispute resolution,
(b) all or part of a proceeding under this Act, or
(c) the obtaining of information or evidence in support of family dispute resolution or an application to a court.
[188] Less than a handful of cases have been decided under s. 89 and fewer still have discussed, in any detail, the factors that inform the court’s discretion in deciding to approve or refuse the requested interim distribution.
[189] In L.L.J. v. E.J., 2013 BCSC 1233, the father failed to detail his anticipated expenditures for legal fees or tender satisfactory evidence as to why he was unable to meet those expenses from his other resources. The father’s application was dismissed with leave to reapply if it was supported by satisfactory evidence. In M.A.L. v. N.A.L., 2014 BCSC 203, the court approved the spouse’s application for an interim distribution of family property in the amount of $200,000 to fund her anticipated legal costs connected to an upcoming two-week trial. In concluding that the request was reasonable, Melnick J. was influenced by the fact that the parties were moving toward trial in very unequal financial circumstances due, in large part, to the disparity in their incomes and access to assets. The chief objective of the award was to level the playing field in the sense of the parties’ access to justice.
[190] In none of the cases yet decided of which I have been made aware has the court confronted the thorny question of the impact of a marriage agreement that, if enforceable, would preclude the applicant spouse from the division of family property.
[191] The provision itself does not bar the making of an interim order where there is an existing agreement concerning property division. I can conceive of no principled basis to read such a limitation into s. 89 or to otherwise consider the existence of such an agreement as an absolute bar to relief.
[192] The blunt purpose of s. 89 is to assist economically disadvantaged spouses to access justice in matrimonial disputes; it is meant to help level the litigation playing field that is so often skewed when one spouse controls all or the majority of the wealth and assets. Application of s. 89 calls for a purposive interpretation, where the need of the applicant spouse to receive an interim distribution and the potential entailing harm to the other spouse are evaluated contextually with an eye on the larger objectives endorsed by the FLA.
[193] In my opinion, the plain meaning of the phrase “harmful to the interests of the spouse” in s. 89 contemplates actual or potential economic harm, and is likely broad in its scope. Determination of the presence of harm requires the court to reasonably anticipate and then assess the consequences that may flow from the interim order being sought. That approach, in turn, invites a highly individualized component to the inquiry. For example, would the distribution being sought in the particular case require a sale of property or of the encumbering of assets; what income tax ramifications might be triggered and what other transactional costs would arise? The concept of harm under s. 89 would also encompass economic implications such as whether the distribution would adversely impact the other spouse’s lifestyle or effectively undermine or prejudice his or her argument for reapportionment.
[194] In cases where the applicant may be precluded from entitlement to the family property based on a pre-existing agreement, the notion of being harmful to the other spouse’s interests could also take the form of the court permitting a distribution so as to enable the funding of an unmeritorious claim. A reasonable way to attenuate that manifestation of harm is to require the applicant to show there is a reasonable prospect of success of impeaching the subject agreement. The claimant in the case at hand has satisfied that hurdle.
[195] There are a number of avenues available to the respondent to obtain funds in order to facilitate a distribution under s. 89. By way of example, he could receive repayment of a portion of his shareholder’s loan to cover all or some of the required amount, he could borrow against the matrimonial property or the apartment on McRae Avenue, or sell the latter.
[196] In terms of a harmful consequence to the respondent’s interests, the main concern is that the claimant would be unable to repay the amount distributed to her if the marriage agreement stands. Evaluating the claimant’s ability to repay has caused me pause. This is because if it is ultimately determined that the marriage agreement precludes her from spousal support as well as the division of assets, she may have to repay support as well as any distribution ordered. The aggregate amount could be considerable and may take several years for the claimant to repay.
[197] Adoption of a strict interpretation of “harmful” could mean that the applicant must be in a position to repay the distributed funds more or less immediately upon the failure of his or her claim to impeach the pre-existing agreement at trial. Were the court to endorse that formulation, then it would follow that a distribution might only be sanctioned where the applicant has assets equal or greater to the amount of the distribution, or a corresponding borrowing power or an assured minimum entitlement to family property so the court could be confident of repayment. Such an interpretation would place the most economically disadvantaged spouses beyond the reach of s. 89 and is not harmonious with a purposive approach.
[198] In my view, the concept of being harmful to the financial interests of the spouse in terms of the recipients spouse’s capacity to repay, must mean harm of an enduring nature. Accordingly, the fact that the recipient spouse may only be able to repay the distribution over a reasonable period of time into the future, as opposed to immediately following an unfavourable outcome at trial, would not, of itself, qualify as being harmful to the other spouse’s interests.
[199] The factors I have weighed in considering the claimant’s ability to repay interim spousal support, including that there is a reasonable prospect of success of impeaching the marriage agreement at trial, apply equally in this assessment. In all the circumstances, I am satisfied that a distribution to the claimant of family property in the amount of $50,000 is necessary to fund the matters referred to in s. 89(b) and (c). I am satisfied that a $50,000 interim distribution from family property can be made without negatively impacting the respondent’s standard of living, compromising his asset base or triggering adverse income tax costs and without harming his financial interests in the overall picture.
[200] In closing, I would observe that the claimant did not provide a budget of her anticipated legal expenses or a timeline within which she expected they would be incurred. I would endorse the tendering of such evidence in support of an application under s. 89 as the preferable approach. It does not follow, however, that the absence of such evidence will render the application fatal, as urged by the respondent. Where, as here, it is abundantly clear that the litigation and business valuation issues are complex, expert opinion evidence is likely required and the history of the court proceedings already predicts a protracted and costly battle, the court may have sufficient information before it to approve a distribution.
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