COVID-19 – Does it impact existing Court Orders?

As the coronavirus pandemic continues to dominate the news and its financial effects ripple through the UK economy, there has been much debate on social media (on Twitter in particular) as to whether the pandemic could constitute a ‘Barder Event’.

A ‘Barder Event’ is where something happens shortly after an Order is made (in this case a Financial Remedy Order), the result of which undermines the very basis of the Order itself. This is best demonstrated by way of an example: 

Imagine that Mr and Mrs Bloggs agreed a financial settlement in January 2020, at a time when there was talk of a virus in China, but there was no real public understanding of the wider impact it may have. Under the settlement reached, Mr Bloggs retained the family business in his sole name (valued at £2,500,000), together with his monthly income. In return Mrs Bloggs kept the family home, and a portfolio of savings also worth a combined £2,500,000, and there was a full-clean break between them.

Fast forward to late March 2020, and Mr Bloggs has now been informed by the UK Government that he has to close his business for the foreseeable future. Whilst there are numerous tax reliefs and loans available to help him keep the business afloat during this difficult period, the reality is that the business is now worth very little. There is also the very real prospect that the business will not survive through this tough period – leaving him with no income and nothing which they had built up during the course of the marriage.

It is fair to say that the net effect of the financial settlement reached now looks very different, and would not have been agreed to by Mr Bloggs. Furthermore, the Court would most likely not have approved such a settlement. 

A different example demonstrating this difficulty is in relation to spousal maintenance payments, which were also made in January 2020. If for instance one party agreed or was ordered to pay regular support (maintenance) to the other, based on an income which can no longer be sustained as a result of the pandemic, then that may lead to significant difficulties. This drop in income could be as a result of one party losing an expected bonus, or the closing of a business from which that parties’ income was obtained. 

‘Barder Events’ were born out of the tragic case of Barder v Barder (Caluori intervening) [1988]. In that case it was held that the wife would retain the family home, as she intended to look after the two children from the marriage for the foreseeable future. The husband was therefore ordered to transfer his legal and beneficial interest in the property to the wife. Sadly, only 5 weeks after the Order was made, the wife killed both children and then herself. She had made a Will leaving all of her assets (including the family home) to her mother. The husband subsequently sought to appeal the Order, even though under the rules he was too late to make that appeal, on the basis that the death of his wife and children invalidated the whole basis on which the Order had been made. He was successful. 

The Court in reaching its decision set out four key conditions which would have to be satisfied in order to succeed with such an application. These included: 

1. that the new events invalidated the basis or fundamental assumption upon which the order was made
2. the new events had occurred within a relatively short time of the order. Whilst no precise time limit was set down, it was ‘extremely unlikely’ that it could be as much as a year and in most cases will be ‘no more than a few months’
3. the Application for leave to appeal out of time should be made reasonably promptly
4. the interests of third parties should not be prejudiced. 

It should be stressed that Barder Applications are notoriously high risk – only exceptionally will a case satisfy all four of the above conditions. This is reflected in the fact that since 1992 only 3 out of the 15 reported cases have been re-opened. 

A key reason for this small uptake, and even smaller success rate, is the public interest in maintaining finality of litigation. Indeed, Hale J commented in the case of Cornick v Cornick [1994] that “once a couple has divorced, and their capital divided, they cannot normally expect to profit from, any more than they should expect to lose by, later changes in the other’s fortune”. This sentiment was re-emphasised in the case of Myerson v Myerson [2009], in which it was held that a 90% drop in the husband’s share portfolio was a ‘natural process of price fluctuation’ and was not enough to reopen an order.

Whilst it would appear then that a change in the value of assets or income, however big the drop, does not constitute a ‘Barder Event’, the question remains as to whether the coronavirus and its associated financial ramifications alters things at all? After all, this is a worldwide pandemic – the likes of which has not been seen during any of our lifetimes, and the impact of which could be very long term. 

There are legitimate arguments that the coronavirus should be treated as a Barder Event, and that for those individuals who have entered into a Consent Order recently (i.e. within the past few months), which has resulted in a significant skew in the division of the matrimonial assets, that the Order should be set aside.

This assertion however is finely balanced against the need to maintain public interest in the finality of litigation. The Courts are likely to take a cautious approach when considering appeals, and to view each matter on a case by case basis. This is to avoid the Courts being inundated with a wave of Barder Appeals. 

In truth, it is currently unknown whether the coronavirus pandemic will be treated as a Barder Event – only time will tell. The first step of course, before commencing any proceedings, will be to approach the other side to see if they will agree to a variation of the existing order. It is only if there is no willingness to have that conversation that an application to the Court may become necessary. For those individuals however that are brave enough to make an Application, many will be waiting with bated breath to await the outcome. 

If you would like to discuss any of the matters raised in this article, please contact Sarah Overy or Stefan Donnelly. Alternatively, please contact another member of the Birketts Family Law Team.