COVID-19: Setting aside financial agreements and orders in family proceedings

As the nation’s lockdown continues, no one yet knows how bad the economic situation may become; share prices have fallen, interest rates cut, there is unprecedented government spending and collapsing businesses. This article looks briefly at whether COVID-19, and its impacts, are sufficient to set aside financial agreements reached by separating couples or financial orders made by the court.

When can you set aside an agreement or order?

A case called Barder in 1988 establishes when a court may exercise its discretion to set aside a Financial Remedy order in truly exceptional circumstances. In Barder, the House of Lords (in allowing the Husband’s appeal) set down four conditions which must be met before the court will consider setting aside the final order:

1. The new event must have invalidated the basis or fundamental assumptions upon which the order was made;
2. The new event(s) have occurred within a relatively short time;
3. The application must have been made ‘reasonably promptly in the circumstances of the case’; and
4. There is no prejudice to third parties who have acquired interests in property in good faith and for valuable consideration.

If these conditions are met there is said to be a ‘Barder event’.

Is COVID-19 a Barder event?

Before considering whether COVID-19 could meet the four conditions above, it is first important to note the judgment of Hale J in Cornick (No. 1), which has been quoted in many Court of Appeal decisions and related to changes in asset values. She said for a case to fall into the Barder remit there must be, among other things, an “unforeseen and unforeseeable” supervening event, probably outside 'natural processes of price fluctuation'. In such an exceptional case, the court could reopen by reference to Barder.

Since 1988 only a handful of cases have been successful in their application to set aside and reopen the issues. But then, we have not seen a global pandemic on the scale of COVID-19.

So could the consequences of COVID-19 be a Barder Event? The answer is: maybe. It will depend on the circumstances of each case.

By way of example

A financial order is concluded on 12 March 2020. The husband retains his business (which he does in the full knowledge that it is risk-laden). In late April 2020, the husband’s business collapses, citing COVID-19 as the cause.

Taking Hale J’s reasoning in Cornick, are the effects of COVID-19 outside 'natural processes of price fluctuation'? Given the nature of COVID-19, probably. However, the second limb of Hale J’s reasoning also needs to be considered. Was the supervening event ‘unforeseen and unforeseeable’? This will depend on timing and the causal link between COVID-19 and the collapse of the business.

Italy went into lockdown on 9 March 2020, the World Health Organisation declared a global pandemic on 11 March and the UK went into lockdown on 23 March. If this deal was concluded on 12 March, it could be argued that it was not unforeseeable, given how the pandemic had evolved across Asia resulting in lockdowns there and the likelihood of the UK following many other European countries. However, it would also have to be shown that it was not unforeseeable that the lockdown would cause the business to collapse. This would depend on the nature of the business. If the business was a hotel chain, it’s likely the consequence was foreseeable. If it was, say, a take-away coffee chain, then it may not have been foreseeable.

Another example could be the death of one of the parties due to COVID-19. Whilst the death may have been unforeseeable, whether it amounts to a Barder event would again turn on the facts. Would the death invalidate the basis of the agreement? If the financial agreement or order was one based on needs, then it may amount to a Barder event as the needs are no longer present. However if the agreement or order was based on the sharing principle, then it may not amount to a Barder event as the basis has not changed.

Summary

There are, of course, many different circumstances which may or may not constitute a Barder event and this article does not seek to consider them all. The court, when considering this issue, will apply public policy considerations; by allowing one case, there will be a flood of others. Given how tightly the floodgates are currently held shut on Barder applications, could the risk be run that if one or two applications seep through citing COVID-19, this then opens the barriers to all manner of potential Barder applications. That undermines the intended finality of court orders.

The considerations at (2) and (3) above in Barder also make it clear that timing of timing of the agreement or order will be a crucial factor as will the speed of the application. It may be said that the time has already passed for a successful Barder application in the Family Court. However, given the ongoing nature of the global pandemic, the next unknown could be the one which opens the court’s doors to a run of successful applications.

There remains a great level of uncertainty as to what the future impact of COVID-19 will be. The consequence may be numerous Barder applications coming before the court, but only time will tell if this pandemic does amount to a Barder event and in what circumstances.

What is clear, however, is the need to consider carefully the implications of COVID-19 and take advice early. If you would like to discuss this further, please contact Sarah Hoskinson or Richard Handel.