Did the Coronavirus Pandemic lead to Divorce settlements being varied or overturned?

18 months on from the start of the pandemic we look at what impact this had on divorce settlements reached before or in the wake of the global pandemic and whether the pandemic constituted a Barder event.

In Spring 2020, when the pandemic first hit and the country was plunged into lockdown, one of the primary questions discussed by family lawyers was whether the pandemic could constitute a Barder event.

What is a Barder event?

A Barder event is a wholly unforeseeable event which undermines the basis on which a final financial order has been made. It is governed by the principles handed down in the 1987 case of Barder -v- Barder, in which Lord Brandon set out four principles which must be satisfied for an application for a final financial order to be set aside or appealed out of time to be successful:

1. A new event has occurred since the order was made, which was unforeseeable and invalidates the assumptions on which the order was made.
2. The new event must have occurred shortly after the order was made – and case law, which has put this principle to the test, has revealed that the court would expect this to be no more than a few months after the order was made.
3. The application should be made promptly.
4. By granting such an application for permission to appeal outside the relevant timeframe, this should not prejudice third parties who have acquired interests in any property subject to the order being appealed.

How have people’s finances been affected by the Coronavirus Pandemic?

As family lawyers, we have seen many people report that their circumstances have been adversely affected by the pandemic – shareholdings have depreciated in value, as have businesses, and there have been numerous redundancies. We therefore have to ask, in a situation where a financial order has been drawn up based on their circumstances prior to the pandemic, has this now changed circumstances for them so dramatically that it entirely changes the circumstances on which the financial order was made and is this a true Barder event?

Could the Pandemic constitute a Barder event?

Depreciation in share prices as a Barder event was tested in the 1995 case of Cornick -v- Cornick (No2), which established that fluctuation in share prices did not constitute a Barder event, even in circumstances where the husband’s share values markedly increased and the wife’s asset share fell to 20%, although it had been 51% at the time that the order was made. After the 2008 financial crash (another extreme event which could arguably have given rise to increased Barder applications), when the case of Myerson -v- Myerson came before the court, it was held that despite the fact that the husband’s asset share had reduced from 53% to minus 5.2%, this again would not constitute a Barder event and the husband’s appeal was dismissed. The judge even noted in the case of Myerson that very few successful applications have been reported.

Whether or not the Covid-19 Pandemic could constitute a Barder event has been tested in two recent cases. In FRB -v- DCA (No 3) [2020] EWHC 3696 (Fam), the husband applied to vary the financial order made both in relation to the amount and timing of the lump sum payments due, or alternatively, to set aside the lump sum as a Barder event. The original final order, which was made in March 2020, provided that the husband was to pay the wife £64 million, with the sum made up of the mortgage-free former matrimonial home (worth £15 million) and the remaining lump sum of £49 million to be paid in precisely-defined instalments. The husband issued his application in September 2020 before the first payment was due, arguing that his assets had been adversely affected by the pandemic. His assets included interests in hotels and care homes.  The husband’s application was not granted. The judge took the view that the husband had placed too much focus on the pandemic and not on his own personal finances and suggested that if this were allowed, many cases would be reopened in this fashion. The judge also specifically stated that at some stage within the next few years, most financial commentators believe that the world economy will be back to where it was and that it was “essential to view H’s application in the long-term as well as in the short term”.

In HW -v- WW [2021] EWFC B20, the parties reached an agreement that the husband would retain the business which formed part of the matrimonial assets, which was worth approximately £3.2m. The wife agreed to transfer her shares in the business to the husband on the basis that he would pay her a lump sum of £1m over a series of instalments. The UK went into its first national lockdown only nine days after the order was made.  In June 2020, the husband initially applied to delay payment for 12 months. The wife then applied to enforce the non-payment of the lump sum order. In November 2020, the husband then applied to set aside the entire order in light of the fact that the company had suffered a fall in turnover, reduced profits, a far-diminished value and long-term liquidity issues. The Judge in that case held that the Coronavirus Pandemic was an extraordinary event, describing it as one “different in nature and scale” to anything else in the parties’ lifetimes – “akin to war, with tentacles spreading across the world”. He also found that the event itself happened sufficiently close to the order, given the timing with which the UK went into lockdown after the order was made, and that the husband had made his application with the requisite haste. However, the judge in this case still found that the risk to the company arising from the pandemic was reasonably foreseeable. He came to the conclusion that although the husband may not have foreseen it, the event itself was foreseeable bearing in mind the World Health Organisation had already declared a global pandemic, which had led to a plunge in the stock market.

So, in answer to the question as to whether the Coronavirus Pandemic could be a Barder Event? The answer has to be no at the moment. With the ongoing situation improving, however, (and the length of time that has now elapsed since the Pandemic first ‘broke’) it remains to be seen how much opportunity is left for an application following the principles in Barder on the basis of the Pandemic, to be successful.

Speak to our Family Law specialists

IBB Law’s family law practice can provide expert advice on all family law issues. Catherine O’Reilly is an Associate Solicitor in the team and can be contacted on 01494 790068 or catherine.oreilly@ibblaw.co.uk. To contact the family law team please email familylaw@ibblaw.co.uk or call 03456 381 381.