18 Jun Coronavirus Consequences: Challenging Settlements Amidst Change
By Isabel Agudo (Junior Associate) and Adam Paterson (Senior Associate)
One of the repercussions of the COVID-19 era is economic turmoil, and by extension a strain on individual finances. Unemployment is rife and investments and businesses of all sizes are suffering.
For some divorcees who thought their case had reached conclusion, they may now find that the outcome reached is unworkable. For example, maintenance obligations may have become problematic because the paying party no longer has the income to discharge those obligations. Orders involving sale of property may be indefinitely frustrated because marketing (and therefore selling) a property has become practically impossible.
Outside of an agreement between the parties to change the terms of any settlement, those affected may need to seek relief from the Court.
Re-opening Financial Settlements
The general rule is that either party can appeal a final settlement/order within 21 days, but a successful appeal may only be based on narrow legal principles. The impact of COVID-19 itself (though undoubtedly significant) would not give rise to a successful appeal. However, one option for the parties is to make an application to set aside the final order based on what is known as a Barder event. The principle takes its name from the 1988 House of Lords case of Barder v Barder and permits the court to re-open a financial settlement in very limited circumstances, upon satisfaction of the following factors:
1) A new event occurs that invalidates the fundamental assumption on which the original consent order was made.
2) The new event must have occurred within a relatively short time after the consent order was made.
3) The request to re-open the financial settlement is made soon after the new event occurs.
4) The application does not prejudice any rights to assets acquired by third parties. For example, someone who has purchased a property that during the settlement had been part of the matrimonial assets.
Unforeseen and Unforeseeable Event
An example of an event that invalidates the basis of an order is a significant change in the value of assets, in this instance caused by the Coronavirus. Losses in wealth or income may be considered a material change in circumstances, and the grounds for reviewing settlements often depend on how much one’s net worth has dropped and the reasons for that drop.
This reasoning is only likely to be successful if a judge views the coronavirus outbreak as an unforeseen and unforeseeable event. This is open to interpretation. It is important to note that any change in the value of an individual’s assets must not be the result of natural price fluctuations (even extreme price fluctuations for example those caused by the economic crash in 2008).
A Global Pandemic
It remains unclear whether the COVID-19 pandemic will be accepted as a rare Barder event as we await court decisions and clarification. It may be that the outcome differs from case to case and will be fact-specific.
At this stage of the coronavirus chaos, family lawyers can only discuss potential arguments and look for solutions for their affected clients. Many cases have been adjourned as a result of court delays, and in view of the post-lockdown backlog, a final outcome may be further delayed.
Any applications made will cause further delay and expense not necessarily planned for by either party. If capital is not currently available to meet legal fees in the interim then it may be that an appropriate litigation lending solution can assist either or both parties to obtain the advice that they need to consider their position in full. If this is a situation affecting you or your clients, do get in touch.