Does Covid-19 constitute a Barder Event?
- Family Law
Barder Events were introduced by the unfortunate case of Barder v Barder (1988). In this case, a Consent Order was approved ordering the transfer of the husband’s interest in the former matrimonial home to the wife as she would be responsible for taking care of the children for the foreseeable future. Five weeks later, and before the execution of the transfer, the wife killed the children and committed suicide. She left her entire estate to her mother, who attempted to enforce the Order. The husband successfully appealed the Order, despite being out of time, on the ground that the death of his wife and children invalidated the basis upon which the Order was made.
The case set out four conditions which must be satisfied for such application to succeed.
- that new events had occurred since the making of the order that invalidated the basis on which the Order had been made so that an appeal would be certain or very likely to succeed;
- that the new events should have occurred within a relatively short time after the making of the Order (usually within a few months);
- that the application for leave to appeal out of time should have been made reasonably promptly in the circumstances of the case; and
- that the grant of leave should not prejudice third parties who had acquired, in good faith and for valuable consideration, interests in property the subject of the Order.
The success rate for Barder appeals is extremely low. This is largely due to the principle of finality, which was highlighted in the case of Cornick v Cornick (1994). The case stated that parties should not seek to profit or lose by later changes in fortune once they were divorced and their capital divided.
It was held in Cornick that ‘the new event had to be unforeseen and unforeseeable but the mere existence of unforeseeability was not sufficient to convert something which would not otherwise be one into a Barder event.
The principles in Barder and Cornick were considered in Myerson v Myerson (2009). As a consequence of the global financial crisis in 2008, an unprecedented rescue package to stimulate the global economy was introduced. This resulted in the husband’s shares reducing in value by 90% in the year after the Consent Order was approved. The Court dismissed the appeal stating that the natural process of price fluctuation, whether in houses, shares or other property, however dramatic does not satisfy the Barder test.
The case law suggests that applications based on an increase or decrease in value of any assets, however dramatic, will not succeed.
In light of the current unprecedented Covid-19 pandemic and its damaging impact on the global economy, many family lawyers are debating whether Covid-19 itself could constitute a Barder Event.
Let’s take an example: Mr and Mrs X reached a financial settlement in January 2020. Mr X retained their business in his sole name, valued at £1,000,000 and his income from the business. In exchange, Mrs X retained the former matrimonial home, valued at £1,000,000.
It is now March 2020 and the government has informed Mr X that his business has to close for the foreseeable future due to Covid-19. Although there are a number of loans and tax reliefs available to support the business through this period of disruption, the business now has very minimal value. If the financial settlement was negotiated in March instead of January, Mr X would not have agreed to Mrs X retaining the former matrimonial home and it is unlikely that the Court would have approved this anyway.
When considering whether Covid-19 is a Barder Event, there are two key questions which must be addressed: (1) was Covid-19 reasonably foreseeable; and (2) is the economic effect of Covid-19 more than the natural process of price fluctuation?
The Covid-19 pandemic itself and the measures imposed by governments across the world in response to it, such as the closing of businesses and schools, lockdowns, and financial and business support are unparalleled and will have long-term ramifications. A compelling argument therefore exists in support of the fact that Covid-19 was not reasonably foreseeable and is not part of the unpredictable nature of investments, therefore falling outside of ‘the natural process of price fluctuation’ in Myerson.
Overall, divorce and family lawyers have argued that Covid-19 might constitute a Barder event for Consent Orders made in the last few months before the economic impact of Covid-19 was known although each individual case will be assessed on its own merits and the level of demonstrable loss. For settlements negotiated after this point, however, Covid-19 is highly unlikely to be a Barder Event.
It is yet to be seen whether the Courts will consider Covid-19 a Barder event. However compelling the argument, it is important to remember that the Courts are very conscious of preventing a floodgate of applications which could influence any such decision.
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