Can financial orders be set aside in the current economic downturn?

Covid-19 (coronavirus) has caused not only a devastating health crisis, but also an economic one. Even though lockdown restrictions are being lifted and employees are returning to work, it is seemingly accepted, nevertheless, amongst economists, financial experts and even the Government that the UK is heading for a severe recession. Many people will be wondering what these dire financial times mean for them if they are getting divorced. The implications are, without doubt, going to be wide-ranging and may not materialise for some time. If you have settled financial matters and now feel that the terms of the order are no longer fair, you may be wondering if it is possible for financial orders to be set aside in the current economic downturn.

When it comes to financial orders on divorce, whether agreed between the parties or Court-imposed, these become binding at the point at which the Decree Absolute is pronounced. Although these are then final, in certain circumstances it can be possible for some aspects of an order to be varied e.g. a maintenance order might be decreased in amount as a result of the paying party losing their job.

For capital orders, such as a payment of a lump sum or a transfer of property,  ordinarily these cannot be varied or altered. Only in certain limited circumstances will the Court set these orders aside. For example, if:

1. One party failed to disclose their £200 million super-yacht, which meant that the order made was substantially different than it would have been; or
2. One party deliberately misrepresented their multi-million-pound business interests, by instructing their accountant to provide an incorrect valuation.

An order may, exceptionally, also be set aside if the Court considers that there has been a ‘Barder’ event.

Case precedent allows for Judges to consider setting aside orders where an unforeseen and unforeseeable event has occurred since the order, which invalidates the basis upon which that order was made. These are called ‘Barder events’ following the case of Barder v Caluori [1987] 2 FLR 480.

This was a deeply sad case in which an order was made transferring the family home to the wife. However, after the transfer took place, the wife killed the children and took her own life. The husband subsequently applied to reverse the transfer. The Court set aside the order as its key purpose, namely to meet the housing needs of the wife and the children, had been invalidated.

The impact of the Covid-19 pandemic remains to be seen and an answer to this question is awaited from the Courts. It will depend upon both the specific circumstances of each case, and the extent to which Covid-19 is considered an unforeseen and unforeseeable event.

In general, it is extremely difficult for a party to successfully argue that there has been a Barder event. Judges have, for the most part, taken a strict approach where concerns changes to the value of assets since an order was made. If the asset was correctly valued and considered at the time, the order should not be set aside simply due to the natural process of price fluctuation.

This strict approach was even applied following the 2008 recession in the case of Myerson v Myserson (No 2) [2009] EWCA Civ 282, despite the fact that the price fluctuation here was extreme and unprecedented (the assets were distributed so that the husband’s mainly comprised his shares, which collapsed in price, losing over 90% of their value).

The justification behind this approach, and why most Barder cases are unsuccessful, is not because Judges do not have sympathy for the applicant, but for reasons such as:

• It is considered hugely important for orders to provide finality for the parties;
• If there are alternatives to setting aside, such as varying maintenance or lump sums payable by instalments, these are often used instead;
• When it comes to business assets and shares, as in Myerson, it is often thought that their value can recover, they provide other benefits, or there is an intrinsic acceptance of risk; and
• A line must be drawn to prevent the ‘opening of the floodgates’ i.e. setting a precedent which allows innumerable applications to be made, potentially overwhelming the already-stretched Courts.

The floodgates argument is going to be a serious consideration for any Court facing a Covid-19-related Barder application. Covid-19 has an almost universal impact on all industries and sectors, businesses and employees, potentially leading to a huge amount of applications for orders to be set aside.

Timing is also critical. One of the criteria in a Barder application is that the event must have occurred in a relatively short time after the original order. Therefore, for applications concerning the Covid-19, it will likely only be arguable for those who obtained an order in the past few months to a year at most.

Therefore, the answer to the question ‘can financial orders be set aside in the current economic downturn?” would be that it remains to be seen, although all indications seem to be that it is unlikely.

Legal advice is strongly encouraged for anyone thinking about the fairness of the financial order they have obtained in light of the pandemic’s impact. To obtain advice tailored to your unique situation, or to discuss whether financial orders can be set aside in the current economic downturn, please contact us.