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Covid-19 and Financial Settlements – The consequences are known to be extreme

News / 07-05-2020 / London

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We are living in the most unprecedented times. The world has been turned upside down, global stock markets have taken an incredible hit, many have found themselves either unemployed or on reduced salaries or with assets which as Richard Branson has told us have significantly reduced in value. All this is without a foreseeable end in sight.

The reality is that no-one knows what the future holds. Anyone who has received a Court Order in Family Proceedings less than a year ago whether by agreement or imposed by a Judge should consider having matters reviewed. Equally where the Order is older but includes instalments of a Lump Sum the unpaid instalments may be challengeable. 

The case of Barder is a long established precedent that confirms that dramatic unforeseen changes may mean the Court would set it aside or vary it on the basis that such considerable change in circumstances means it is no longer valid.

It is important to review this to avoid further economic suffering in situations where it has now become apparent that it is impossible to comply with the terms of an Order that has been made or to do so would produce a completely different and unjust result wholly different to what was intended.

The obvious option is to apply to challenge the order on the basis of a “Barder Event” argument. The real question is “Is this likely to succeed ?” Of course there are no guarantees but it is definitely worth exploring and to do so promptly because delay will mean the opportunity is lost.

So what can be done in these circumstances?

It is important to explore what constitutes a Barder event.

What is a “Barder Event”?

In the case of Barder v Barder [1987] the former matrimonial home was owned jointly by the husband and wife.  An order had been made by consent during the divorce proceedings for the husband to transfer his interest in the home to the wife, who would be looking after the two children, within 28 days of the Order being made and that he make substantial periodical payments towards the children. However, 5 weeks after the award had been made but the order had not yet been executed, the wife killed their two children and also committed suicide. As a result the husband applied for permission to appeal the order as the only beneficiary of the wife’s estate was her mother who was herself rather wealthy.

This case established that where an event occurs which was unforeseen or unforeseeable and which undermines the foundation upon which the  financial settlement was based, the court may allow a challenge to a financial remedy order.

For the Barder principle to apply, 4 conditions must be met:

  1. The new event must have occurred since the order was made and invalidated the basis of the order or the fundamental assumption on which the order was made, so that an appeal would be very likely or certain to succeed;
  2. The new event must have taken place within a relatively short period of time of the order being made. There is no specific guidance on how short a period is acceptable but it is generally agreed that it should be less than a year and ideally no more than a few months;
  3. The application to appeal out of time has been made promptly after the event occurred; and
  4. Granting leave to appeal out of time would not prejudice any innocent third parties’ interests in the property which is the subject of the order.

Whilst each case is dependent on its own facts and circumstances, some situations where the Barder principle has been applied include:

Changes in housing needs:

In the case of Nasim v Nasim in 2015, the financial remedy order stipulated that the proceeds of sale of the former matrimonial home were divided 70/30 between the wife and husband respectively on the basis that the children were to spend 70% of the time with the wife and 30% with the husband. However, after an altercation between the wife and the eldest child and the wife’s subsequent prosecution for a criminal offence all in the space of around 6 weeks after judgment, the children both refused to live with the wife and spent most of their time with the husband. Therefore, this change in living circumstances meant that the basis of the financial remedy order was no longer applicable and so an appeal would very likely succeed.

Changes in the value of assets:

In the case of Cornick v Cornick in 1994, dramatic price fluctuation occurred soon after judgment which made the husband’s asset value soar whilst the wife’s asset value decreased by 20%. This was not judged to be a Barder event because the change was the result of the natural processes of price fluctuation, even though it was unforeseeable.

Following the financial crisis of 2008, the case of Myserson v Myseron (No 2) in 2009 held that the dramatic reduction in the husband’s assets shortly following judgment did not constitute a Barder event as again it was due to the natural processes of price fluctuation. A further reason why the appeal was not allowed was due to the fact that there remained £2.5 million in lump sum instalments due from the husband to the wife still outstanding and these could be varied.

Inheritance:

In the case of Critchell v Critchell in 2015, the husband received an inheritance of £180,000 as his father died within a month of a consent order which had split the £175,000 equity in former matrimonial home (FMH) so that the husband received a charge in his favour for a lump sum equal to 45% of the net proceeds of sale. The wife appealed the order after the inheritance was received and was successful in extinguishing the charge which the husband had over the FMH. 

Changes in employment status:

In Maskell v Maskell in 2001, it was held that the husband’s unemployment, which occurred shortly after the judgment, was not capable of being a Barder event because loss of employment is “something that hundreds of thousands of breadwinners…have to face”.

Remarriage and cohabitation:

In Williams v Lindley in 2005, the wife’s engagement a few months after the order was given did constitute a Barder event as it meant that the purpose of the lump sum with which the husband was to provide her was no longer relevant or necessary. The lump sum had been given to her for the urgent need to re-house herself and her children should she need to sell the family home. 

Following Williams v Lindley, in the case of Dixon v Marchant in 2008 the Court of Appeal, before the Rt Hon Wall LJ and the Rt Hon Ward LJ looked specifically at this issue. In this case there had been a lump sum buy out of periodical payments and the former wife then promptly re-married. The principle of finality was considered to remain fundamental and the wife got to keep the money she had received and the Appeal was dismissed. 

Death:

This was the case in Barder itself where the wife killing herself and their children constituted an unforeseen and new event. However, death does not always constitute a Barder event. In the case of Amey v Amey in 1992, an agreement had been made where the wife was awarded a lump sum in recognition of her contribution to the family business. Her subsequent death was not a Barder event as it did not change the extent of her contribution to the business and the husband also did not bring the appeal promptly; therefore both the first and second Barder conditions were not satisfied.

It should be noted that until now the Courts have been keen to restrict the application of Barder principles due to the public interest in maintaining the finality of litigation. Nevertheless, it remains to be seen whether the Courts will consider COVID-19 and the current worldwide pandemic to be a Barder Event capable of challenging a financial settlement order. In any case, the Courts are likely to take a cautious approach when they consider appeals and will review each matter on a case by case basis. But due to the current ECONOMIC scale of the pandemic and the glaring uncertainty surrounding the length of time government restrictions will be kept in place and what the likely long-term economic impact will be, it could be possible to argue it constitutes a Barder event. 

Whether Pandemic will be considered a Barder event has not yet been tested; the last major pandemic was over 100 years and quite a long time before Barder.

This article was co-authored by Trainee Solicitor at Ince, Francesca Leonard.

Yael Selig

Yael Selig Consultant

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