Interim Distribution of Family Property

Separation and divorce is never easy. It’s hard – particularly on children. And it can also be expensive. While there are better and less expensive ways to resolve some family law disputes (ie. counselling, mediation, etc.), many family law matters end up in litigation where a third-party decision-maker (whether a Judge or Arbitrator) has to decide the issue(s) the parties cannot resolve themselves. And this costs money. While separating spouses usually use their disposable funds (incomes, cash, savings, etc.) to fund this litigation, sometimes these funds run out. In that case, what are the spouses to do? Sometimes they have to look to dividing and selling family property to fund their ongoing family law litigation. This is called an “interim distribution of family property”. But is it likely that an interim distribution of family property would be awarded in order to fund an on-going family law litigation? Not automatically. Courts will generally consider several factors before granting an interim distribution of family property, including the financial needs of both parties, the nature of the assets, and whether such a distribution is fair and reasonable under the circumstances. Additionally, property ownership before divorce can play a crucial role in determining whether certain assets are even subject to division or deemed exclusively owned by one party. Ultimately, granting an interim distribution is a discretionary decision made to balance fairness while ensuring the litigation process can proceed without undue hardship on either side.

Family Property Act  

Unfortunately, (unlike in British Columbia), Alberta does not have specific legislation authorizing the interim distribution of family property. While Section 9 of the Alberta Family Property Act allows the Court or Arbitrator to distribute family property in Alberta by selling and or transferring family property between the parties, it was often argued that without such specific legislative authority, no order for the division of property should be made until the matter could finally be heard at a Trial. For a long time the only Court authority on the matter was set out in the 1993 Alberta Court of Appeal case of Katz v. Katz [(1993) 48 RFL (3^rd) 1] where Justice Cote observed (at page 3): “… the question is not whether the Act allows for interim distribution orders, but the question is whether the Act prevents the party from spending his share of the property beforehand.”

Court Discretion

Fortunately, a number of recent Alberta cases [summarized in the Alberta Court of Appeal decision in Mucha v. Mucha (2024 ABCA 46)] have provided greater clarity on the authority of the Courts and Arbitrators to grant an interim distribution of property under the Family Property Act.In Wolf v. Wolf (2019 ABQB 200), Justice A. Woolley outlined the principles set out in previous court cases (omitted here) to be considered on an application for an interim distribution of family property, stating (at para.’s 45 – 47):

“An Extraordinary Remedy”

More recently, in Holmes v. Holmes (2023 ABKB 1), Justice K. Feth set out the current state of the law on interim distribution of family property as follows (at para.’s 31-34, cases omitted):

An “extraordinary remedy” which “should not be made” if it might affect the final property rights of the parties – wow! So how does this bode for an interim distribution of family property solely to fund on-going family law litigation? Not well. In Fletcher v. Fletcher ([2012 ABCA 18, recently referred to in VLN v. SRN (2019 ABQB 849) at para. 41)], on an application for advance funds to pay (partially) for litigation expenses, the Alberta Court of Appeal stated (at para. 18):

“The determination of an amount of an advance is highly discretionary. The discretion enjoyed by the court affords it an opportunity to consider all relevant factors that arise on the facts… The case management judge was aware of the financial situations of both parties… He knew that both had large legal bills and that the appellant owed $85,000 in legal fees and disbursements… He emphasized that his order to advance funds was not intended to act as fuel to generate more litigation, but to assist the appellant to pay some of her legal bills. His decision to advance $50,000 was reasonable and entitled to appellate deference.

So, while Alberta may not have specific legislation authorizing the interim distribution of family property, Alberta Courts have consistently permitted an advance on the ultimate distribution of property under Section 9 of the Family Property Act for specific purposes (ie. to pay for the party’s accommodation, to maintain the family home, or the expense of an adult children’s post-secondary education, etc.; see: Fleming v. Fleming, 2016 ABCA 88). However, Alberta Courts are cautious to distinguish between an interim advance of property from an application for Advance Costs (designed to assist economically disadvantaged spouses “level the playing field” in funding family law litigation, see: Lakhoo v. Lakhoo, 2015 ABQB 357) in order to avoid providing further “fuel” for continued litigation.

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