In the recent case of FRB v DCA ((No.3) [2020] EWHC 3696) the court held that the Covid-19 pandemic was not an unforeseeable event which entitled a husband to set aside the final financial remedy order made on his divorce.

In this article, Francesca White and Jenny Duggan examine the decision and consider whether the Covid-19 pandemic might be grounds for setting aside a financial remedy order if the situation is different to that in FRB v DCA.

A year ago, Britain faced its first lockdown. The world pressed pause, and no one was quite sure what would happen next. This was no exception for couples who had reached a financial settlement in their divorce shortly before the pandemic took hold.

A final financial remedy order sets out the financial agreement reached between a divorcing couple. It represents the end of financial negotiations and provides the finality most people need to move forward. For this reason, the English courts are only willing to set aside a final order in exceptional circumstances.

While we all came to terms with the concept of a ‘lockdown’, family lawyers nationwide were asking whether Covid-19 could be considered a ‘Barder’ event. You can read our initial take on this subject here and our updated thoughts below in the light of an interesting new case.

What is a Barder event?

A Barder event is so-called because of the landmark case (and tragic tale) of Mr and Mrs Barder (Barder v Barder (Caluori intervening) [1987] 2 All ER 440). Mrs Barder killed herself and their two children five weeks after a final financial order was made in her divorce.

The order provided for Mr Barder to transfer the family home to Mrs Barder and had been made on the assumption that Mrs Barder and the two children needed a home for the foreseeable future. That assumption fell away when she and the children died. Indeed, the implementation of the order would have left Mr Barder homeless, and his ex-wife’s heirs would have inherited the family home. Thankfully, Mr Barder successfully applied for the court to set aside the order to transfer the family home.

In the case of Barder, the House of Lords outlined four conditions that must be established before an order could be set aside on the basis of what we now refer to as Barder events:

1. New events have occurred, which were unforeseen and unforeseeable at the time of the making of the order, and which invalidate the fundamental basis or assumptions on which the order was made.
2. The new events have occurred within a relatively short time of the order being made. In most cases, this would be within a few months.
3. The application to set aside should be made reasonably promptly in the circumstances of the case.
4. Third parties should not be adversely affected in setting aside the original order. (For example, if before killing herself, Mrs Barder had sold the property to a third party, it could not have been transferred back to Mr Barder.)

It is clear that, despite Mr Barder’s success, this family’s tragedy set a high bar for future applications.

The court’s approach to Barder applications

While Covid-19 is unprecedented, some of the effects of the pandemic are nothing new. Market volatility is a fact of life, and assets dropping in value or loss of employment may not meet the Barder threshold of an unforeseeable event. The following cases show the court’s historical approach (and read a bit like A Series of Unfortunate Events):

1. The 1994 case of Mr and Mrs Cornick (Cornick v Cornick [1994] 2 FLR 530). Mrs Cornick was understandably upset. Shortly after her divorce from Mr Cornick, the shares he retained in the divorce settlement dramatically increased in value by 360%.Mrs Cornick argued this was a Barder event, as she was left with a meagre 20% of the net assets. Nonetheless, the court held that natural processes of price fluctuation (whether in houses, shares or any other property, and however dramatic) are not unforeseeable and do not satisfy the Barder test.
2. The 2001 case of Mr and Mrs Maskell (Maskell v Maskell [2001] EQCA Civ 858). Mr Maskell lost his job two months after a final order was made and unsuccessfully argued this was a Barder event. The court found that Mr Maskell losing his job was a long way from a Barder situation.
   There are hundreds of thousands of breadwinners who have to face the challenge of losing what seems to be secure employment as a result of all sorts of events.
3. The 2009 case of Mr and Mrs Myerson (Myerson v Myerson [2009] EWCA Civ 282). Mr Myerson unsuccessfully sought to set aside a final order on the basis that the 2008 financial crisis was a Barder event. He was a fund manager operating through a quoted company and retained a substantial shareholding in that company as part of the divorce settlement. His shares plummeted in value by 90% as a result of the financial crash.The judge observed that Mr Myerson had not sold his shareholding and crystallised a loss. He had instead continued as a “captain of a great ship, currently in stormy waters but steaming on”. The court found that Mr Myerson had voluntarily retained the risk-laden assets in the divorce and the decrease in value, however dramatic, was not unforeseeable. The judge warned others against making Barder applications on the grounds of a “subsequently encountered financial eclipse”.

The case of FRB v DCA

The recent case of FRB v DCA was heard in December 2020. The judgment has put to the test speculation about whether the Covid-19 crisis could be a Barder event.

The final order at the centre of this case required the husband to pay the wife £64m, comprising the family home (mortgage free) worth £15m, and a lump sum by instalments totalling a further £49m. In September 2020, just two days before the payment of the first instalment of £30m was due, the husband applied to vary the order, or alternatively that the lump sum provision should be set aside and re-quantified on a Barder event basis.

The husband’s position was that Covid-19 had crippled him financially and that this entirely unforeseeable course of events fundamentally undermined the fairness of the final order. The court refused the husband’s application. This is why:

1. Lack of credibility
   The husband had previously been criticised for his dishonesty and poor financial disclosure in the financial remedy proceedings. In his application to vary/set aside and requantify the lump sum provision, the husband claimed he was not in a position to pay the first instalment of the lump sum because of an “enormous reduction” in his financial worth.However, around the same time, he had signed a lease for an apartment in one of the most prestigious and expensive blocks in Monte Carlo. The amount of rent was not disclosed by the husband. The judge described the husband as “wealthy and deceitful” and did not see how, in the circumstances, he could claim hardship.
2. Lack of evidence
   The husband’s evidence for his application was set out in a statement. In this statement, the husband’s arguments generally concentrated on the macro-economic situation arising from Covid-19, rather than evidencing its effect on his global assets.The scarce evidence that was provided did not indicate an enormous financial reduction. While some of his business interests (including hotels and care homes) would inevitably suffer as a result of the pandemic, no numbers were put forward to back this up. Furthermore, the husband’s business interests were so varied that it was far from obvious that there had been a collapse in his global fortune.
3. Short term thinking
   Remarkably, the husband’s statement concluded by asking the court to make directions for the valuation/revaluation of his assets by single joint experts in support of his application. This would have meant valuing/revaluing no less than 10 global properties, two care homes in England, a London property and 25 businesses. It was estimated that the valuation process would cost up to £300,000 and take six months to complete.The judge considered the unpredictable financial times in which we now live. He observed that the major stock market indices are performing well and have rebounded to above their pre-Covid-19 levels. A valuation done today would inevitably be even more speculative than a pre-Covid-19 valuation. Furthermore, many commentators believe that at some stage within the next couple of years, the world economy will be back to where it was. In this sense, it was essential to view the husband’s application in the long term as well as the short term.The judge decided that the husband had not shown a proper basis for revisiting the final order, and it was not correct for the court to allow the husband’s application to vary the quantum on macro-economic grounds.

Could Covid-19 amount to a Barder event?

The cases referred to in this article evidence the court’s reluctance to open the ‘floodgates’ of litigation, and emphasise the public interest in finality. However, that is not to say that a successful Barder application is impossible, even on the grounds of the Covid-19 pandemic. The case of FRB v DCA is a good example of how to fail but perhaps the outcome would have been different had the husband’s application been proportionate and well evidenced.

A Barder application is a difficult application to make but if you take this route it is critical that you act quickly. Indeed, it is well worth taking legal advice if a final order no longer reflects your financial reality as there are other routes you could take. This may be the last pandemic that has the chance of being a Barder event, as it will be less arguable to claim that pandemics are unforeseen or unforeseeable events in the future.

Tips for negotiating a financial settlement during a pandemic

If you are currently engaged in financial negotiations and are worried about the effect of the pandemic on your obligations or award under a final order, it is worth considering the short and long term advantages/disadvantages of the assets you would like to retain.

If stability is your priority, you may prefer to walk away with more liquid assets (such as cash). If that is the case, you might consider settling for less than half of the marital pot for peace of mind and allow the other party to retain slightly more of the pot but with a higher proportion of risky assets. Alternatively, you may prefer to retain the risky assets (such as shares in a private company), the value of which could rise (as in the case of Mr Cornick) or fall (as in the case of Mr Myerson). Perhaps you would like to find a happy middle.

Thorough and reciprocal financial disclosure throughout the proceedings will help you understand the assets, and both legal and financial advice on the outcome of a financial settlement should enable you to look forward with confidence.

A version of this article appeared in the New Law Journal on 30 April 2021, and this can be accessed here.

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