The effect of COVID on financial settlements on divorce

In the event that something unforeseen and unforeseeable happens that undermines the basis of a financial settlement, following a divorce, that has already been recorded and finalised in an Order of the Court, it is open to either husband or wife to reopen the matter and appeal the terms of that Order.  This principle comes from the case of Barder v Barder in 1987 where sadly the wife killed the children and then committed suicide within weeks of the final Order being made. These were obviously extreme circumstances, which occurred within a relatively short period of time and were found to invalidate the basis on which the Order was made.  If implementation of the Order had proceeded, the family home, that was to be transferred into the wife’s sole name, would have then been left to the beneficiaries of her estate.  The Court set aside the original Order so the husband retained the property.

Now known as Barder events, subsequent cases have seen applications in far less tragic circumstances where assets have changed value, one party has started to cohabit, remarriage and changes in the law that were all unknown and at the time the final Order was made.  The Courts are always mindful of not opening the floodgates to applications and subsequent cases have clarified that changes in the value of an asset even where significant, remarriage that was not intended at the time of the Order being made and redundancy would not qualify as a Barder event.

Covid-19

Many family lawyers wondered at the start of the pandemic how this might play out in financial settlements that had concluded in the months prior to Covid-19.  The pandemic, its effects and longevity were certainly not anticipated in the early stages.  People’s lives, businesses and employment were turned upside down.  How many times did we hear that we were living through “unprecedented times”?

It is fair to say that the Court has not generally found that even significant increases or decreases in the value of assets is sufficient to reopen the terms of a financial settlement.  The Court has previously considered such applications following financial crashes but even when shares have lost all their value, in cases where a party has chosen to retain the more risk laden assets, the Court has not intervened and allowed the appeal.  It is worth noting that there is a distinction between an Order that has been made following an agreement between divorcing couples and an Order that has been determined by the Court.  When the Court is asked to make a final Order, because the parties cannot agree, they are duty bound to consider if either party is retaining more of the risk laden assets and this will often be reflected in an unequal division of assets.

The Court has further determined that global economic crashes are a natural impact of price fluctuation.  There have been cases where share portfolios have more than tripled in value shortly after an Order has been made but this has been held as a natural process of the markets and rightly not something that is totally unforeseeable however unfair, the party left with the ‘other assets,’ might feel it is.

It has tended to be circumstances that are not so financially related where Barder applications have succeeded.  Lump sum payments to a spouse that has died shortly thereafter have been reduced so the paying party retains the majority of the matrimonial assets rather than it passing to the deceased’s estate.  Another example of this is a 2015 case of a wife against the executors of the husband’s estate who had committed suicide less than one month after the final Order had been made.   

There have been a few cases now that have cited the Covid-19 pandemic as a Barder event in their applications.  Cases that have relied on the global economic downturn have not been successful for the same reasons given in those cases prior to the pandemic that have sought to rely on the stock markets crashing.  The global markets cycle in and out of economic downturns and so it does not meet the threshold of being unforeseeable, even if the trigger was an unforeseeable event such as Covid-19.

It is fair to say the Court has shown a real reluctance to accept Covid-19 as a reason to revisit financial settlements on divorce, which has led to there being only a few applications made on this basis.  If one party has been left paying maintenance that they can no longer afford, due to a loss of employment or change in income, there are different avenues that can be explored to deal with this such as variation applications and it is always worth seeking advice on this at any time after an Order has been made.

For more information on this or any other Family law matter, contact Jemma Jones (jemma.jones@bpe.co.uk 01242 248287).

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.