Is Coronavirus a Barder Event?

Is Coronavirus a Barder Event?

Target audience for this article: Matrimonial finance (divorce) solicitors who are advising clients on financial remedies (ancillary relief) applications where final orders have been made in the last twelve months.

Covid-19 is ‘unprecedented’:

With the social, financial and economic landscape having changed so radically since the beginning of 2020, you may have a number of clients who have recently settled financial cases and whose circumstances have now been significantly altered. Dissatisfied with how their finances have worked out in the post-Covid-19 world, they may return to you asking whether any legal redress exists.

Application to vary:

Of course, if the final order included periodical payments for the benefit of the children or other party, or a lump sum payable by instalments, then there is a statutory right to apply to vary the order under Section 31 Matrimonial Causes Act, 1973 (S31 MCA). Upon such application, the court will have regard to all the circumstances of the case including “any change in any of the matters to which the court was required to have regard when making the order to which the application relates”. Thus, your client will be able to explain to the court the impact of the current public health crisis upon their circumstances and it will be taken into account.

Capital orders:

However, if your client wishes to vary a capital order (transfer of property or lump sum order), then S31 MCA does not apply. There is no statutory route to vary a capital order; no such opportunity to undermine the finality of litigation between the divorcing parties has been considered appropriate by Parliament.

The circumstances in which final orders within financial remedies proceedings can be altered or set aside are extremely limited (outwith the presence of ‘vitiating factors’ such as fraud and duress).

Perhaps your client will suggest that the ‘unprecedented’ change wrought on their financial situation by the ongoing Covid-19 public health restrictions means that it is unfair to hold them to a settlement agreed prior to then having any knowledge of this latest and most potent ‘Coronavirus’ or its likely effects.

In order to advise them in their predicament, you will need to remind yourself of the key case law on ‘Barder events’:

Barder v Barder [1988] AC 20.

In 1985 Mr Barder successfully appealed out of time against the consent order which had transferred his former family home to his wife absolutely. The Barders had two children, and five weeks after their final order had been perfected, Mrs Barder unlawfully killed both of the children and then committed suicide herself. The only beneficiary of Mrs Barder’s estate was her mother, who had no pressing need for the house. Mr Barder’s appeal was allowed on the ground that the original order had been made on the fundamental assumption (an implicit assumption - it was not recorded at the time) that Mrs Barder and the children were going to need the former marital home for some years, and that fundamental assumption had been vitiated by subsequent events.

There were further appeals to the highest level. The House of Lords confirmed that Mr Barder’s order would be set aside, but made it clear in its judgment that this was not an invitation to open the floodgates to further cases. Arising from this case the very specific concept of a ‘Barder event’ was born:

• A new event which invalidates the basis, or fundamental assumption, upon which the final order was made
• The supervening event happened shortly after the making of the order (within a few months)
• The application to set aside the order is made promptly
• Set aside will cause no prejudice to third parties who have acquired interests in property in good faith for valuable consideration

As the extremely tragic nature of the facts in Barder may suggest, it is a relatively rare application which succeeds in persuading the court to follow this particular precedent, however, it has been done in the cases listed below:

Critchell v Critchell [2015] EWCA Civ 436

The final order in this case transferred the former family home to Mrs Critchell, but subject to a Mesher order in favour of her husband. Within one month of this order being made, Mr Critchell came into a substantial inheritance and wife argued that this was a ‘Barder event’. The court agreed with Mrs Critchell, finding that the husband’s future housing need, which had been a fundamental assumption of the final settlement and addressed by the Mesher order, was now met through his inheritance and his charge over the family home was, therefore, extinguished.

Nasim v Nasim [2015] EWHC 2620 (Fam)

A final order was made which awarded a 70% share of the value of the family home to Mrs Nasim, partly on the basis of her role as primary carer of the children, aged 13 and 10 years. Six weeks after this final order there was an ‘incident’ between Mrs Nasim and the older child, which lead to, firstly, the criminal prosecution for assault (and conditional discharge) of the mother and, secondly, the change of the children’s residence to live with their father. This was found to be a Barder event, leading to the setting aside of that order with the suggestion that a 50:50 division of the family home would be more appropriate in the new circumstances.

Needs vs Sharing:

Common to both the above successful applications was a factual matrix where, like the original case of Barder, needs-based awards were made and then, shortly afterwards, the needs in question had, unexpectedly, disappeared.

What then of sharing-based awards where events subsequent to the final order had radically affected the shares awarded?

Cornick v Cornick (No.1) [1994] 2 F.L.R. 530

In Mrs Cornick’s proceedings, the district judge had made a lump sum order, giving her 51% of the capital assets. Shortly afterwards Mr Cornick's company shares increased in value enormously, so that wife's lump sum represented only a 20% share. Mrs Cornick sought leave to appeal out of time on the grounds that the increase in the value of the shares was a supervening event which justified the reopening of the case.

However, Mrs Cornick was unsuccessful: in order to qualify as a ‘Barder event’ the supervening occurrence (that is the rise in the value of the shares) had to be both unforeseen and unforeseeable. The court was of the view that parties should not seek to profit by later changes in fortune once they were divorced and their capital divided.

Myerson v Myerson No 2 [2010] 1 W.L.R. 114

The other side of the coin was considered in the Myerson case, in the context of the devastating impact of the 2008 global financial crisis.

At the time of Mr and Mrs Myerson’s Financial Dispute Resolution Hearing in March 2008, their assets were valued at £26 million. It was agreed that wife would receive a 43% share (largely in cash) and husband would retain a 57% share (largely in shares in one Company worth, at the time, £2.99 each). A year later, post-crash, Mr Myerson’s Company shares were worth only 27.5p each, altering the capital division to a 14% share to husband and a 86% to wife. Mr Myerson argued that the forces within the global economy and the collapse in the company's share price constituted a new events which undermined the basis upon which the original consent order was made.

Husband’s attempt at a ‘Barder event’ appeal was dismissed. Although extreme in extent, the court found that the fall in the share price was ‘a natural process of price fluctuation’, and not an unforeseeable event. Essentially Mr Myerson had made a business appraisal and taken a speculative position and the court should not subsequently relieve him of what had turned out to be a bad bargain.

Of note in this case was the fact that the payment of the lump sum to Mrs Myerson was spread over five instalments of which £2.5 million was left to pay, so Mr Myerson was able to invoke the statutory power of variation, which could enable his needs to be met.

Also relevant to the current Covid-19 situation is the speech of Lady Justice Hale (as she was then, made in Cornick and quoted in Myerson) which focuses our attention on the potential cause of the change in asset values:

“something unforeseen and unforeseeable had happened since the date of the hearing which has altered the value of the assets so dramatically as to bring about a substantial change in the balance of assets brought about by the order where, provided that the other three conditions are fulfilled, the Barder principle may apply — however, the circumstances in which this can happen are very few and far between and the case law, taken as a whole, does not suggest that the natural processes of price fluctuation, whether in houses, shares or any other property, and however dramatic, fall within this principle”.

Conclusion:

As the quotation above suggests, the Barder principle is not completely ruled out where an unforeseeable event has substantially changed the share of the assets received by each party arising from the final order.

Although the precise nature of the ‘unprecedented’ social and economic impact of coronavirus will surely count as ‘unforeseen and unforeseeable’, it may be that any subsequent financial impact on the asset value of ‘houses, shares or any other property’, will be considered merely as part of the ongoing ‘natural processes of price fluctuation’. In other words, the court may take the view that although nobody foresaw this particular economic recession (arising from the Covid-19 crisis), significant periodic economic recession itself is a foreseeable feature of global markets and therefore its effects on a sharing-based award (however drastic) will not form grounds for a Barder appeal.

The thread running through the case law above seems to be that a needs-based case is more likely to be considered sympathetically under the Barder criteria.

Although, it is only right at this point to remember Mr Maskell, who attempted to appeal a needs-based award following his unexpected redundancy which occurred two months after his final order was made (Maskell v Maskell [2001] EWCA Civ 858). His appeal was eventually successful on other grounds, however, the Court of Appeal was quick to point out that redundancy itself, although significant to Mr Maskell was not an unforeseeable event. In the words of Lord Justice Thorpe:

“This was a long way from a Barder situation. There is nothing permanent about employment of the sort that Mr. Maskell held at the date of judgment before the District Judge. There are hundreds of thousands of breadwinners who have to face the challenge of the loss of what seems to be secure employment as a result of all sorts of events. It may be some major takeover or it may be that some shift in the international market destroys the security, not only of individuals but of whole communities. Judge O'Brien was undoubtedly right to deny Mr. Maskell a fresh hearing on the application on the principles in Barder.”

So, in addition to a needs-based case, there must exist the element of real ‘unforeseeability’. A redundancy caused by the closing of a business due to the current public health restrictions may be found to be just another unhappy consequence of a ‘shift in the international market’, as for Mr Maskell above.

That said, it does appear that the particular course and nature of Covid 19 has re-structured the United Kingdom economy is such a way as to create unforeseeable unfairness in certain circumstances.

It is suggested by the author that it would be possible to run an argument for setting aside a capital order, based on Barder principles, where some (or all) of the following features exist together in a case:

A recent needs-based final order with a limited asset base;

An asset which would have previously been considered a relatively ‘safe’ income-producing asset (for example a business involving aviation, hospitality or entertainment) and is now relatively unproductive is held by one party;

An asset which is relatively unaffected by Covid-19 is held by the other party;

Each party to the settlement relies solely on ‘their’ asset to meet their identified housing need;

The hard needs of one party now cannot be met from the newly unproductive asset, whereas the other party with the unaffected asset is now in a relative sufficiency;

The impact of Covid-19 on the asset base means that the needs of the minor children can no longer be adequately met.

Ironically, much may depend on the long term prognosis of such business assets, but of course the opportunity for any ‘Barder appeal’ will be time limited. It may be that the court considers that the timely discovery of a vaccine is a foreseeable event and, therefore, any current unproductivity will be too short-lived to be relevant to capital division. In my experience of representing clients in Financial Dispute Resolutions since Lockdown began, judges are very reluctant to consider that parties’ current ‘Covid-related’ financial woes are anything other than temporary.

As ever, each case will turn on its precise facts and so we will have to wait with bated breath for the first case to come before the courts. If you consider that you have a client who may be seeking to run a Barder-type appeal then please do contact the Family Clerks at Deans Court Chambers in order to arrange for advice on your particular situation.