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Court Grants $350,000 Interim Distribution Order, Allowing Man to Fund Litigation Against Ex

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Court Grants $350,000 Interim Distribution Order, Allowing Man to Fund Litigation Against Ex

In a case called Zhang v Fan, the man and woman had been married in China in 2003, and separated in Canada in late 2017. They agreed to start divorce proceedings in China in early 2018.  As part of those proceedings, the man’s assets were frozen by a Chinese court.  His annual income was around $26,000.

Since his own money was now out of reach, and facing a long custody and child support battle ahead, the man lacked the financial means to pay the cost of the upcoming litigation against the woman.  He already owed his current lawyer a significant sum.  He therefore filed a claim with the court, asking for an order for $350,000 in the form of an interim distribution of family property.   The B.C. Family Law Act allows the court to make this type of order in appropriate circumstances, as long as it was both necessary, and not harmful to the interests of the woman.

The woman resisted.  Although she admitted to having $2 million in assets, she claimed to have no real net worth, and thus no money from which to make the requested advance of funds.  She purported to owe $6 million to her 30-year-old daughter (from a previous relationship), resulting from a series of significant loans over the years.

The man insisted that these loans were actually fictitious; he doubted that in a few short years the daughter could build a business so successful that she could afford to lend the mother funds of that magnitude.   The court described the parties’ dichotomous positions this way:

[The man] expresses scepticism that the debt incurred by [the mother] to [the daughter] is valid. He submits the debt is poorly documented and that there is the appearance that [the mother] has contrived to reduce her net worth by means of fictitious borrowing from her daughter …. [the mother] submits that the loans are fully documented and approximately $6,000,000 is properly owing.

The court was asked to resolve the matter.   First of all, it dismissed the mother argument that a forced advance of funds would prejudice her by depleting her ability to repay the daughter on the alleged hefty loan. The interests of a third-party lender – including a family member – were not relevant when deciding whether to order an interim distribution, the court said.

Next, the court noted the woman had ignored recent court orders preventing her from dealing with property in her possession, pending a trial.  She had withdrawn $920,000 from an investment account in breach of the order, and it was unclear what she did with the money.

Finally, the court added that the man would likely abandon the litigation if he could not obtain an advance, It concluded as follows:

The cost of the litigation has been, and will be, substantial. [The man] has a modest income and he has no present access to his assets in China. I conclude that without an advance, he will not be able to pay his counsel what he presently owes for legal fees and disbursements and it is probable that his counsel will withdraw. If that were to happen, [The man] would have much difficulty retaining other counsel. He cannot realistically act for himself. Quite apart from having no familiarity with the management of a complex family law case, he is not proficient in English. The cost of translation throughout a 15-day trial would be prohibitive.

Practically speaking, the only property that could be a source of funds for the ordered advance was a $2 million home that the woman owned.  The court her to take the steps necessary to borrow $350,000 against the security of that property, and to distribute it to the man within 30 days.  As an alternative, she could buy out the man’s interest in that family home for $1,100,000, if she preferred.

For the full text of the decision, see:

Zhang v Fan, 2018 

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at RussellAlexander.com

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