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Setting aside a financial remedy order in the light of the coronavirus pandemic

Solicitors in London

Setting aside a financial remedy order in the light of the coronavirus pandemic

News article published on: 6th April 2020

Can you do it at all?

Barder v Barder [1987] 2 FLR 480 established that a court may allow a challenge to a financial remedy order on the ground of new events, if the following four conditions are satisfied:

  • 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 to be given, the appeal would be certain, or very likely, to succeed.
  • The new events occurred within a relatively short time of the order being made. It would be extremely unlikely that the length of time would be more than a year. In most cases it would be no more than a few months.
  • The application for leave to appeal out of time is made reasonably promptly in all the circumstances of the case.
  • The grant of leave to appeal out of time would not prejudice third parties who have acquired, in good faith and for valuable consideration, interests in property which itself is the subject matter of the relevant order.

What type of new events?

For the Barder principle to apply, the new events must be unforeseen and unforeseeable (Cornick v Cornick [1994] 2 FLR 530 Hale J at page 537).

What is unforeseen and unforeseeable?

In Cornick, three possible causes of a change in the value of an asset after an order has been made were identified by Hale J (at page 536), who set out how to deal with each case but the relevant cause relating to the coronavirus pandemic is that of the event being potentially unforeseen and unforeseeable.

Unforeseen events

Something unforeseen and unforeseeable may happen after the date of the hearing that alters the value of the assets so dramatically as to bring about a substantial change in the balance of assets.

If all the conditions are fulfilled, the Barder principle may apply. However, the circumstances in which this can happen are very few and far between. The case law does not suggest that the natural processes of price fluctuation, whether in houses, shares, or any other property, and however dramatic, fall within this principle and the cases of Myerson v Myerson No 2 [2009] EWCA Civ 28 and Horne [2009] EWCA Civ 487 show how difficult it is to set aside orders in cases where there have been asset valuation fluctuations.

Coronavirus

  • Is the coronavirus pandemic a different category of event from the global financial crisis and is it a Barder event? Could it be said to have been unforeseen and unforeseeable?

Certainly the pandemic was unforeseen before the end of 2019 when the first case in Wuhan was apparently detected. Pandemics in themselves could be said to be foreseeable as we have had SARS and Ebola outbreaks in the last twenty years or so. However there needs to be some objectivity regarding foreseeability as otherwise it is impossible to think of anything which might not be foreseeable. However I can see it being argued, possibly successfully, that whilst coronavirus may not have been foreseen or foreseeable, a loss of income or share value due to a global financial downturn is foreseeable. It is difficult to predict how this might play out in the courts but there is bound to be further litigation involving these issues.

  • In order to appeal out of time the order which is being appealed against should be less than twelve months old. The principle of finality in litigation is very strong and courts understandably are very reluctant to re-open old cases and be overwhelmed with a tsunami of fresh litigation.
  • Any appeal out of time has to be made quickly once the event has occurred. This brings up practical problems given that the economic landscape is changing so quickly and providing up to date evidence regarding the impact of the virus on businesses and individuals is a moving target. However if you are appealing an order of less than twelve months you probably have no more than a month or so from now (beginning of April) to lodge the appeal.
  • In Myerson one of the problems for the husband who appealed the original order out of time (and lost) was that there was an order for the payment of a lump sum by instalments and thus was capable of variation. The court felt that he had some element of remedy within the order thus rendering an appeal unnecessary.
  • Another issue was that the husband in Myerson had taken a speculative risk when settling regarding the division of assets. The court found that when a businessman took a speculative position in compromising his wife’s claims, the court should not subsequently relieve him of the consequences of his speculation by re-writing the bargain at his request.

Appeals against financial remedy orders

Appealing against orders out of time is fraught with difficulty and will only be available to a few litigants namely those whose orders are less than a year old. If the order is more than a year old then setting it aside will be practically impossible although enforcing the order against someone who has no assets will be a real challenge. Having a substantial order may in these circumstances be of little or no value.

Maintenance payments are of course always subject to variation which will give payers whose income has dramatically reduced some relief. Payees need to be realistic about payers’ new circumstances but payers must be transparent regarding their financial situation and provide appropriate documentary evidence promptly.

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