The measures taken by the government in response to the outbreak of COVID-19 have had a sudden and dramatic impact on many people’s financial situations. Many employees have lost their jobs, business owners and the self-employed have seen work dry up almost overnight, the housing market has stalled and stock markets have plunged by around 30%.

If you recently reached a settlement in your divorce or civil partnership dissolution, you may be finding that you can no longer afford to make payments that you have been ordered to make.  In Part 2 of this series, I will look at what you can do to try to delay or vary parts of an existing court order that are no longer affordable.
<

 

For some people, though, it may feel like a variation or time extension is not enough. What can you do if the financial impact of coronavirus means that your financial order is now fundamentally unfair? In this article, I look at whether anything can be done to set aside the order altogether and get the court to look at the whole situation again from scratch.

Can you set aside an order altogether?

Yes, you can, although it is not easy. It was first done in the case of Barder v Barder in 1987. In that case, Mr Barder had been ordered to transfer the family home to his wife for her and their two children to live in. Tragically, five weeks later Mrs Barder killed herself and the children. Mr Barder asked the court for special permission to appeal even though the normal deadline had already passed. The court agreed and said that orders could be set aside even outside the normal appeal timeframe where:

  1. A new event has occurred which invalidates the basis on which the order was made, and
  2. The new events occurred within a relatively short period of time (said to be months, not years)

The court also made clear that any such application should be made promptly, so if you find yourself in this situation it is important to act quickly.

Can changes to your finances be considered a Barder event?

It is important to be aware that applications based on change in circumstances are usually refused.  Judges are very keen to ensure that people treat court orders as being final. They are very worried about opening the floodgates to huge numbers of applications and so have required the change in circumstances to be very significant indeed.

A particularly stark warning comes from the case of Myerson v Myerson in 2009. At the time of the original hearing in early 2008 (just before the global financial crisis) Mr Myerson’s shares were worth £15m, trading at £3 a share. By the time his Barder appeal was heard they were trading at just 27p – a drop of over 90%. The Court of Appeal said that it was not enough to change an order just because asset prices had changed due to “the natural processes of price fluctuation”. This was true even though the judge acknowledged that the price drop had been dramatic. The court took the view that stock market crashes are known to happen and part of the risk parties take if they keep their wealth invested in shares. To set aside the original order a change would need to be both unforeseen and unforeseeable in nature. Such cases, said the court, would be few and far between.

There is obviously a risk that the current crisis would be dealt with in the same way. The family court makes around 40,000 financial orders a year and will not want to see all of those cases reopened.

It is too early to know how judges will look at financial damage caused by the coronavirus lockdown. It is easy to argue that the situation we now find ourselves in goes far beyond normal price fluctuations for shares and property. These are truly unprecedented times. People are losing their livelihoods because the government has told them not to go to work. Even three months ago no-one would have factored this possibility into their decision-making when planning their financial settlement.

Should I apply to have my financial order set aside?

Our view is that judges are likely to allow some Barder applications, but will do so on a limited and case-by-case basis. Permission will only be granted to those most drastically affected.

Where the main impact on someone’s finances has been a drop in asset values, the court might still take the Myerson view that price fluctuations are not unforeseeable. They might also take the view that the unfairness would be better remedied by allowing additional time to pay rather than reopening the case. This is particularly likely if the government continues to suggest that life could return to normal in a matter of months.

But time may not be the answer in all cases, for example where a person’s business and their livelihood has been wiped out during the lockdown. This may include, in particular, owners of small businesses who are typically willing to sacrifice their share of other assets to protect their business on divorce. If they are no longer able to operate their business they will have lost both their income and their capital wealth in a single stroke.

We think the strongest applications will be where the original settlement was slightly out of the ordinary. One example might be where one person has stayed in a much bigger house than they needed because it was expected the other could access a large mortgage based on their business income. If their business has now closed – at the government’s request – there might be a good argument to reconsider whether the house needs to be sold and the proceeds divided more evenly.

In a situation like this the court is likely to want evidence of why the order was structured the way it was. An applicant with copies of several written offers back and forth may have an easier time than one who’s agreement was reached more informally. If the structure was imposed on an applicant by a judge at final hearing (rather than having been agreed voluntarily) it is possible that the claim would be stronger still.

The timing of the agreement may well be crucial.  The court may well want to look at what information was in the public domain the time.  If a judge thinks you knew the risk was high, but proceeded regardless, your chances of success are likely to be far slimmer.

Another situation where a Barder application may be appropriate is where maintenance has been “capitalised” (i.e. rolled up into a one-off payment). This figure will have been calculated based on assumptions about the payer’s future income. Had the settlement been structured as monthly maintenance payments the payer would have been allowed to ask the court for a reduction (you can read about the impact of coronavirus on maintenance payments here). It might, in the circumstances, be fair to let the court look at this order again.

Until some of these applications start coming to court we do not know how judges are going to deal with them. But the case reports are clear: judges will only consider them if they are brought promptly. If you want to have a go at this you need to get on with it rather than wait to see how others have fared. But, these will be risky applications. Not only are they difficult to win but unlike normal financial cases there are likely to be costs implications if you apply and fail. On top of that, the process itself will be expensive and may be subject to appeal, which will take more time and significantly more money.

For some people, though, the impact of this financial crisis is so dramatic that they will feel they have no choice. It is those people who really ought to be allowed to revisit their divorce settlement.

Mark Harrop is a Family Solicitor & Mediator working at our London offices, based in Marylebone.

Leave a Reply

Your email address will not be published. Required fields are marked *

Please note: our response to comments will be for general information purposes only and does not constitute legal or professional advice.

Your email address will not be published. Required fields are marked *