Coronavirus – Impact on Financial Settlements in Divorce

We have seen a number of queries from clients/potential clients who have said that they have agreed and finalised financial agreements in their divorce/separation in the last six months or so. In some of the cases they have agreed a deal whereby perhaps one of the partners had the house and the other partner has retained shares or a family business. Obviously COVID 19 has had a dramatic impact on family businesses both large and small. For example, businesses are being told that they have to shut, and whilst the business can apply for loans and defer tax, the reality is that the value of businesses has been dramatically reduced and a previously secure income stream is now in jeopardy, whereas the other party of the divorce has received assets which may well be safer. The question is can the Court review this settlement?

Ordinarily once a Financial Remedy Order is made then that is meant to give certainty. It cannot be reopened or undone save in the most exceptional circumstances.

In the legal world, these changes in exceptional circumstances are known as BARDER events. A BARDER event effectively is where something happens which was unforeseeable when the Order was made, shortly after the Order which undermines the whole basis of the agreement. There are four key principles which have to be satisfied for the principles of BARDER to apply:

1. New events have occurred since the making of the Order which invalidate the basis upon which the Order was made.

2. The new event should have occurred in a relatively short period of time since the Order was made. In most cases this would only be a few months.

3. The application for leave to appeal out of time i.e. to invoke BARDER, should be made promptly.

4. The grant of leave to appeal out of time should not prejudice third parties who have acquired in good faith and for valuable consideration, interest in property (for example if the wife had been given the house but she had sold it on to someone else, they would not be prejudiced by the BARDER application.

The category of post Order events which will qualify as BARDER events is therefore very limited to the most extreme or unlikely of subsequent events.

Is the COVID 19 pandemic a BARDER event?

At this moment in time there is no answer. Certainly if you are agreeing a Financial Remedy Order now, you need to think very carefully whether that Order should be finalised as I think that any Orders made from now the principles of BARDER will not apply.

It may well be the case that the Court will try and find a way to say that the COVID 19 pandemic is not a BARDER event primarily for a fear of opening the flood gates to a raft of further litigation. There was a case in the past where a husband tried to invoke a BARDER event where the value of his shares had fallen by nearly 90%, in that case the Court held that that was down to a natural process of price fluctuation and was not enough to reopen the Order. However COVID 19 has nothing to do with the natural risk involved in shareholding. The reality is that COVID 19 has changed the whole world, not just one company.

Smith Partnership has a team of specialist lawyers who are able to advise on all aspects of marital breakdown including complex financial issues. If you wish to discuss any financial issue or any previous agreement that you may have reached which falls into this category please do not hesitate to contact us on 01332 225225 and ask for Miss Ruth Jones.

Please note, all advice and opinion offered in this article are subject to change in line with the latest government advice.

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