Banner triangles

Can COVID-19 economic impact justify reopening your divorce settlement?

The coronavirus lockdown means that the personal finances of many people are now very different to what they were at the time of entering into their divorce settlement.

COVID-19 has already had a significant impact on job losses and wage or salary cuts as well as reductions in share prices and pension funds. Pressure on recently divorced couples may also be exacerbated if orders provide for the transfer, re-mortgage or sale of a property.

Those recently divorced couples are now asking if the unprecedented times we find ourselves in justifies the reopening of an order? Divorce lawyers are also puzzling over the more esoteric legal question of whether COVID-19 can be categorised as a Barder event.

Orders that can be varied or reopened

  • Maintenance pending suit: orders providing for an amount of maintenance to be paid, usually on a monthly basis until the pronouncement of decree absolute.
  • Periodical payments and secured periodical payments: orders for the payment of maintenance from decree absolute for a specified term or on a joint lives basis.
  • Lump sums by instalments.
  • Provision for children: whether maintenance or payment of a lump sum by instalments.
  • Deferred lump sums: orders that include provision in respect of pension rights.
  • Settlement orders: for example, an order providing for the settlement of a property for the benefit of a spouse or children of the family.
  • Sale of property.
  • Pension sharing order: made before the pronouncement of decree absolute.

The Barder principle

What happens if you don’t have one of the orders that can be varied or reopened as above?

If new events occur that invalidate the basis or fundamental assumption on which a financial order was made (the Barder principle) an application can be made to have it set aside. The grounds on which a financial order may be set aside are a matter for decisions by judges. Barder -v- Barder [1987] 2 FLR 480 established that a court may allow a challenge to a financial order on the ground of new events, if the following four conditions are satisfied:

  1. New events have occurred since the order which invalidate the basis or fundamental assumption on which it was made, so that, if leave to appeal out of time were given, the appeal would be certain or very likely to succeed.

  2. The new events should have occurred within a relatively short time of the order having been made. In the relevanat judgement, Lord Brandon stated “While the length of time cannot be laid down precisely, I should regard it as extremely unlikely that it could be as much as a year, and in most cases, it will be no more than a few months”

  3. The application for leave to appeal out of time should be made reasonably promptly in the circumstances of the case.

  4. The grant of leave to appeal out of time should not prejudice third parties who have acquired in good faith and for valuable consideration, interests in a property which is the subject matter of the relevant order.

Interpretation of the Barder principle

The courts have generally taken a very restrictive approach to interpreting and applying the Barder principle. Case law seems to suggest that the natural process of price fluctuation (however dramatic those fluctuations may be) whether in houses, shares, or any other property does not come within the ambit of the Barder principle. Nor has unemployment been capable of being a Barder event as loss of employment is “something that hundreds of thousands of breadwinners...have to face” [Maskell v Maskell [2001] EWCA Civ 858.

Following the global financial crisis of 2008, a number of applications to vary or re-open orders fell short of the Barder test. In Myerson v Myerson (No 2) [2009] EWCA civ 282 the husband sought to appeal an order out of time on the basis of a catastrophic collapse in the value of his shareholding in a company which he had chosen to retain as the bulk of his share of the matrimonial assets. He sought to argue that the financial crisis of 2008 had been an unforeseen event falling with the Barder principle. The court reaffirmed earlier case law that natural processes of price fluctuation do not satisfy the Barder test.

The court also refused the husband’s application because payment of a lump sum (amounting to £2.5 million) was spread over five instalments which could be varied. Given this potential relief, an appeal would be uncertain to succeed, thereby failing one of the Barder conditions that an appeal should be certain or very likely to succeed. Importantly though this case didn’t rule out the possibility that a party who encountered “financial eclipse” could argue that their financial remedy order should be overturned as a result. An order is also more likely to be set aside as a result of a significant change in asset values if the applicant is unable to rehouse as a consequence.

So can COVID-19 be considered a Barder event?

The answer here depends to a large extent on whether COVID-19 is more than a natural process of price fluctuation and if it was reasonably foreseeable. The courts are likely to want to restrict the floodgates of potential litigation to preserve the finality of litigation and clean break orders. However, we are in unprecedented times where so many established assumptions, behaviours or ways of doing things are being turned on their head. COVID-19 is a completely unprecedented pandemic and different to the global financial crisis of 2008. Although every case will depend on its own particular facts, there will be financial consequences of the pandemic for some families which may fit squarely within the Barder principles.

So where do you stand if you need to resile from a previous agreement?

If one party is not in agreement to varying previously agreed terms of settlement, they can issue an application to ask the court to make an order in the terms of the agreement.This type of application is called “a notice to show cause why the other party should not be held to the terms of the agreement”. A change in circumstance is one of the grounds that can be used to defend such an application. Again, the change must be unforeseen and must undermine the basis of the agreement reached.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

Insights

Read the latest articles and commentary from Shoosmiths or you can explore our full insights library.