Barder in the time of Covid

One of the topics which has cropped up for discussion most during the pandemic has been whether or not its impact on parties’ finances might qualify as a Barder event justifying an order being set aside. This was a point raised at the most recent open meeting of the Financial Remedies User Group, of which David Chidgey and I are members. This article looks at one recent case in which Dan Leafe and I appeared and considers some of the implications.

It is not uncommon in financial remedy proceedings for circumstances to change markedly shortly after a final order is made. Maybe one of the parties loses their job or remarries, or the house sells for a lot more (or a lot less) than was thought, but almost always such changes are insufficient to affect the order and are instead looked upon simply as part of the vagaries of life. Moreover, parties who have been involved in litigation are often exhausted, and the last thing they want to embark upon is unpicking an order which may have been long in the making.

Occasionally, however, the change is so fundamental as to drive a coach and horses through the order and make it so obviously unfair as to require a rethink. All the cases are needs cases, for if the assets are divided on the basis of a sharing claim it is hard to imagine how a party’s entitlement to a share of the assets could be fairly disturbed by a later event.

The classic example of this is the tragic case of Barder v Barder (Calouri intervening) [1988] AC 20 where, shortly after the final order, the wife murdered the children before killing herself. In doing so she destroyed the premise on which the order had been based, namely her need to re-house the family. The order was subsequently set aside and in approving this outcome the House of Lords set out four tests which must be satisfied before such an application can succeed: first, the new event must have invalidated the basis on which the order was made; secondly, the new event must have occurred within a few months of the order; thirdly, the application to set aside must be made promptly; and lastly, third parties must not be prejudiced.

In Cornick v Cornick [1994] 2 FLR 530, Hale J made clear that the new event must also have been both unforeseen and unforeseeable, on the basis that if the new event was something which the parties had actually foreseen, or could have done, it should have been taken into account at the time and it would be wrong to allow them a second bite at the cherry.

The relevant cases have been helpfully summarised by Mostyn J (who else?) in DB v DLJ [2016] 324. In this case Mostyn J makes the point that the same law applies across all divisions of the High Court, and then shows his erudition by exploring those civil cases which deal with the definition of reasonable foreseeability, including those which many of us will remember from university, such as The Heron II [1969 1 AC 350 and The Wagon Mound (No.2) [1967] 1 AC 617. In doing so, the Judge has some fun with the notion of a death being unforeseeable and (predictably) quotes the words of Benjamin Franklin that in life nothing is certain except death and taxes.

So in Barder cases involving a death, with all due respect to the qualification in Cornick, the real question is not whether the death was foreseeable, but whether it was foreseeable within a very short space of time after the final order.

The most recent helpful case for those arguing for a set aside is perhaps Critchell v Critchell [2015] EWCA Civ 436, where the new event was again a death of a parent and the receipt of an inheritance. The inheritance meant that the husband no longer needed the Mesher order he had been awarded, and the original order was set aside by my former colleague Her Honour Judge Wright.

Such successful cases may be contrasted with those not involving a death, such as Myerson v Myerson [2009] EWCA Civ 282, which tend not to succeed. There the new event was a collapse in the value of shares in the husband’s business as a result of the global financial crisis. In this case the then Nicholas Mostyn QC successfully appeared for the respondent and his advocacy style was perhaps summed up by the comment that he presented “a barrage of submissions most of which hit their intended targets”. In another stand-out phrase, the husband’s appeal was dismissed with this reasoning:

“When a businessman takes a speculative position in compromising his wife's claims, why should the court subsequently relieve him of the consequences of his speculation by re-writing the bargain at his behest?”

And:

“natural processes of price fluctuation, whether in houses, shares, or any other property, and however dramatic, do not satisfy the Barder test.”

In other words, particularly where the order is a consent order, if one of the parties (usually the husband) takes on the risky assets, he can expect cold comfort if the value of those assets subsequently plummets.

In a recent case in the family court in Taunton, Dan Leafe and I were faced with a situation whereby at a final hearing in a small money case (about £400,000) the wife had secured an outcome whereby the husband was ordered to pay a lump sum amounting to all of the liquid capital, so that she could re-house herself and the parties’ youngest child. She was also awarded term maintenance and a school fees order. It was a classic needs case, leaving the husband, who had the greater income, with the illiquid capital and living in rented accommodation.

At that hearing the wife’s prospective inheritance was raised, given that her mother was elderly and suffering from dementia, but the District Judge made clear that he regarded it as too uncertain both in timing and amount to be relevant to his consideration.

Four and a half months after the final order the wife’s mother died, leaving an estate worth a little over £1m, of which the wife’s share was one third.

On learning of the death the husband took advice and then, within another three months, applied to set aside those parts of the order referred to above, namely the lump sum, the maintenance and the school fees. No complaint was made about the balance of the order and no attempt was made to start from scratch. Naturally he did not pay any part of the lump sum in the meantime (it was not due at the date of the mother’s death) and his application included an application for a stay.

The lively debate which once raged as to the correct procedure for such an application has now been put to bed by FPR 9.9A, which applies where no error of the court is alleged and which permits the court to set aside part only of its order.

The wife in our case responded by applying for the husband’s committal to prison for wilful non-compliance with the order.

As Mostyn J makes clear in DB v DLJ, simply establishing that the four Barder tests are met does not of itself entitle the applicant to an order setting aside the original order: the court retains a discretion; and so it was important for both sides to file statements setting out what had happened and why it would be fair or unfair for the order to be set aside.

After a day of evidence (on the new Cloud Video Platform) and written submissions, judgment was reserved. When it arrived the District Judge retained the school fees order, but set aside both the lump sum and maintenance orders.

As the Court of Appeal made clear in Critchell, in dealing with such cases the court is always juggling two competing priorities, namely a fair outcome and the finality of litigation. Successful applications to set aside orders will be extremely rare (this is a first for me). Also, perhaps understandably, courts are very reluctant to review their own orders for fear not only of devoting too many scarce resources to a case, but also of opening the door to a flood of similar cases.

Which brings me on to the suggestion that the pandemic might give rise to a raft of Barder cases. The pandemic has affected all walks of life, including, at least in the short-term, the value of houses, the viability of businesses and job security. Almost overnight the FTSE 100 fell by 30% and houses became unsaleable; once thriving businesses closed and the government was forced to pay the wages of more than 8m workers. No one would have predicted such a catastrophe, and so, it might be suggested, surely the first limb of Barder is met?

And yet much the same could be said about the banking crisis in 2008. This too was a once in a generation crisis, brought about by a perfect storm of sub-prime lending and deregulated markets. No one would have predicted that either, and yet the judgment in Myerson is one-way traffic – the applicant never stood a chance – and it makes sobering reading for anyone tempted to launch an application.

In summary, I am pleased to say that after 28 years at the Bar I have done a Barder case; but I don’t expect to do another one.

Nicholas Sproull

 

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