Interim Distribution of Property

Maggie House -Published Aug 16, 2023

Many family litigants find themselves in an impossible position: you don’t qualify or have been denied for legal aid, and you cannot afford to retain a lawyer.  How can you possibly navigate your way through the court system without the money to hire legal representation? One option is to obtain an order for what is called an “Interim Distribution of Property”. 

The interim distribution of property is a temporary way for spouses to divide property before a final court order to be able to fund a family law proceeding, including to be able to hire a lawyer. The court can make orders such as the forced sale of family property, such as the family residence, or the forced liquidation of investments like RRSPs, . 

Section 89 of the Family Law Act establishes two conditions that must be met by an applicant when seeking an interim distribution. First, the applicant must demonstrate that they need the money to fund family law proceedings or pursue the resolution of a family dispute. Second, the applicant must prove that the distribution will not harm the opposing party. Even if these conditions are met, the Court must use its discretion when issuing an interim distribution. Judges and masters may consider factors such as the financial needs and circumstances of both parties, the value of property, the potential impact of interim distribution on the final division of assets, and the risk that one party will dispose of or damage property before a final order is made. In some relationships, there is unequal control over family finances and assets. Interim distribution is a remedy to correct that power imbalance and promote access to justice.  

Need for Money

An applicant cannot seek interim distribution for general living costs. In Ostro v Kotyk, 2019 BCSC 2382 the Court explicitly stated that the proceeds of the sale of the former matrimonial home must be used exclusively for the purposes set out in Section 89 of the FLA. Section 89 does not ensure litigants maintain the same standard of living they enjoyed during marriage.  In L.L.J. v E.J., 2013 BCSC 1233, the Claimant’s application for interim distribution was dismissed because he failed to detail his anticipated expenditures for legal fees or demonstrate why he was unable to meet those expenses.

Harm to the Other Spouse

An interim distribution cannot be ordered if it would harm the opposing party. The onus is on the applicant to satisfy the court that an interim distribution will not prejudice the other party’s position at trial. In Negus v Yehia, 2015 BCSC 857 the Claimant sought a $200,000 interim distribution from the Respondent’s business to fund her legal costs. The Respondent opposed the application citing the challenges of generating such funds from his business. The Court found that commercial inconvenience is insufficient to be considered harmful. In I.F. v R.J.R., 2015 BCSC 793 Justice Ballance states that “the plain meaning of the phrase ‘harmful to the interest 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”.  The level of harm may be dictated by the circumstances of each individual case. As Master Elwood explains in MacFarlane v Ponds, 2019 BCSC 544 the level and nature of harm that will defeat an application under Section 89 must be understood in light of its remedial purpose. 

Sale of Family Property 

To obtain an order compelling the sale of the family residence, an applicant must show that the sale of family property on an interim application is necessary or expedient. When looking at a Rule 15-8 application, the following factors may be considered:

  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;
  4. Whether the other 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;

In M.A.L. v N.A.L., 2014 BCSC 203, the Court concluded there were too many unknowns concerning the extent to which each party had equity in the matrimonial home. Additionally, since the Claimant, child and nanny all lived there, it was not expedient to order the sale. Like the distribution of liquid assets, the sale of family property is a discretionary exercise of the judiciary. In A.B. v C.D., 2015 BCSC 2134, the Courts affirmed the idea in Bodo v Bodo (1990), 1990 CanLII 2291 (BCSC), 25 R.F.L. (3d) 295 (B.C.S.C.) that any doubt regarding the sale of family property should be resolved in favour of the status quo. It is unlikely the Court will make an order for the sale of family property unless all parties have suitable accommodation and there is an imbalance of financial resources between parties.

Disclaimer – By contacting Portside Law Corporation through email, phone or direct message does not establish an attorney-client relationship. An attorney-client relationship is formed once both parties agree in writing to such a relationship. The information found in this document is of general nature and is not intended to be legal advice. Please contact our office to speak further about any particular legal question you may have.

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