Many people are facing financial insecurity as a result of the impact of COVID-19 and the resultant lockdown. This means that people who have obligations under final financial orders are worried about whether they will be able to comply with them. In some cases, agreements that seemed manageable before COVID-19 now seem impossible to comply with or unfair.
Whilst many obligations in financial remedy orders are variable in the event of a change of circumstances (e.g. the amount of monthly maintenance payable to a former spouse is variable – as discussed in this article), many obligations in financial remedy orders are not variable. For example, the amount payable pursuant to a lump sum order is not variable, although the timing of that payment may be varied.
There are, however, limited circumstances in which the court will re-consider whether to release a party from their obligations under a financial remedy order – even those obligations which are not capable of being varied in the event of a change of circumstances. One of those circumstances is if an unforeseen/unforeseeable event takes place shortly after the making of the financial remedy order, which undermines the basis on which that order was made.
The principle that final orders for lump sum payments can be re-considered/set aside by the court if an unforeseeable event arises derives from the case of Barder.
However, the court is extremely reluctant to re-open orders and so if there is an alternative to setting aside an order they will normally utilise it. It is worth noting as well that the court has the discretion to set aside an order but is not obligated to do. This means even if the court finds there has been a Barder event it may elect not to set aside the order.
There are four conditions which have to be met before a court will make an order to set aside a final order, namely:
- there has been a new event which invalidates the basis on which the final order was made;
- the event has occurred within a relatively short space of time from when the final order was made;
- the application to set aside the final order has been made reasonably promptly in the circumstances of the case;
- the application will not prejudice the rights of third parties, who may have acquired interest in a property since the final order was made.
In relation to the first condition, a new event must be unforeseen and unforeseeable if the court is going to consider it to be an event capable of justifying the setting-aside of a financial remedy order.
Barder principle and COVID-19
It seems possible that the global impact of the COVID-19 pandemic will be considered a Barder event, but this depends on the specific facts of the case and the type of event.
Following case law, whether COVID-19 will invalidate the basis of the final order is fact specific, for example:
- the death of one party from COVID-19 when the lump sum payment was made on the basis of the ‘sharing’ principle – this may not invalidate the order as it was made on the basis that each party was entitled to a proportion of the assets acquired during the marriage, and so those assets will now form part of the deceased party’s estate;
- the death of one party from COVID-19 when the lump sum payment was made on the basis of the ‘needs’ principle – this may invalidate the order as it was made on the basis of meeting the needs of a party in the future – yet the death of that party means those needs no longer exist.
- a business’ value decreases as a result of the economic impact of the pandemic – this may invalidate the fundamental assumption upon which the final order for a lump sum payment was made; however the timing of when the final order was made is key in relation to this.
As a result of the requirement that the new event be unforeseen and unforeseeable, and the second condition of the Barder principle (that the event has occurred within a relatively short space of time from when the final order was made) it seems that there is a very small window in which final orders can be set aside on the basis of Barder. This window appears to be for final orders made between mid-2019 and no later than 23 March 2020 (when the UK went into lockdown and the economic impact of the pandemic was no longer unforeseeable).
The court is likely to be lenient when considering whether the third Barder condition (to apply reasonably promptly) has been complied with. This is because the court has had to switch to remote working and focus on urgent and emergency cases only. However, this does not mean it will entertain applications made months or years after the impact of COVID-19. If you need to set aside a final order it is important to take legal advice as soon as possible.
In respect of the final Barder condition, if a third party has acquired an interest in an asset that was formerly a matrimonial asset, you should not apply to set this part of the order aside as the court will not do so.
Whilst the impact of the COVID-19 pandemic may fall within the Barder principles in certain cases, this is a very narrow ground on which an order might be set aside and technically tricky to navigate as well as being fact specific. If you are concerned about your ability to comply with your obligations under a financial remedy order then you should obtain legal advice as soon as possible.
The points discussed in this article cannot replace advice tailored towards your situation and should be considered informative only.
If you have any questions, our Family team is available to assist you with the full range of difficulties that you may be facing at this unprecedented time. You can contact the team here.