Family analysis for Lexis Nexis PSL: by Maria Scotland, barrister and joint-head of the 5SAH Family Law Team.
In HW v WW, the court considered an application to set aside a final financial consent order reached between the parties at a financial dispute resolution (FDR) hearing, arising due to a claim that the impact that the coronavirus (COVID-19) pandemic had had upon the value of the business which the husband retained was a Barder event. Maria Scotland, barrister at 5 St Andrew’s Hill, considers the decision and its implications.
What are the practical implications of this case?
The court held that the coronavirus pandemic is an extraordinary event, different in nature and scale to any similar world event in our lifetimes, akin to a war. In the circumstances, the coronavirus pandemic and its impact upon a key asset is a potential Barder event (per Barder v Barder (Calouri intervening) [1987] 2 FLR 480) opening the door to set aside. So long as an application is made in good time of the effect of the pandemic being noted upon the value and liquidity of an asset, an application has the potential to open the door to set aside. It should be noted, however, that this was a circuit judge decision at Family Court level, albeit applying established law, and that the husband’s application to set aside in this case was refused.
What was the background?
The husband was 53 years old, and the wife 49 years. They were married for 24 years. There were three children, one of whom was still a minor.
The parties reached an agreement as to finances at the FDR appointment. The assets included the family home and a second property with equity of £530,000, debts of £200,000, pensions of £558,000 and a business in which both the husband and the wife held shares with a net value of £3.2m.
The parties agreed that the husband would retain the business, while the wife would retain the family home and the net proceeds of sale of the second property. The wife agreed to transfer her shares in the business to the husband on the basis that he paid her a series of three lump sums equal to £1m. The wife would receive 40% of the capital and 33% of the pensions after a long marriage. The departure from the sharing principle was agreed on the basis that the wife would retain the ‘copper bottom’ assets while the husband took the risk-laden assets.
The parties agreed to a clean break after two years. The husband’s net income was £350,000 per annum. While the husband would exit the marriage with no liquid assets, the greater percentage of the assets and clean break was clearly valuable to him.
HHJ Kloss indicated that the agreement was sensible and fair. It was obvious from the terms of the order that the husband could only pay the lump sums to the wife by using the company cash reserves and/or using the company to borrow funds. The question on the application to set aside the order was whether the fall in the companies’ performance and value post the pandemic justified the order being set aside.
What did the court decide?
The court first considered the legal framework within which an application to set aside a final order where no error of the court is alleged is made. The starting point is Barder v Barder (Calouri intervening) [1987] 2 FLR 480 and the four conditions under the case which have guided matrimonial practitioners ever since.
The court also considered Hale J’s (as she then was) judgment in Cornick v Cornick [1994] 2 FLR 530 and the three possible scenarios that may arise where an application is made to set aside an order on the basis that the value of an asset has fallen since the original order. The husband argued that this case fell squarely within the third category, that is that the pandemic was a new ‘unforeseen and unforeseeable’ event that had happened since the FDR appointment and which had altered the value of the assets so dramatically as to bring a substantial change in the balance of assets divided under the order.
The decision in Myerson v Myerson [2009] EWCA Civ 282, [2009] 2 FLR 147 was also considered. In Myerson, the Court of Appeal approved the Cornick categorisation and held that a new event need not be ‘concrete’ but could ‘embrace happenings, developments or occurrences’.
The court held that the ‘event’ was the coronavirus pandemic and the consequential impact upon the value and liquidity of the company came within the ‘developments’ expressly approved in Myerson. However, the court did not accept that the husband could not have foreseen the impact of the pandemic upon his business, nor that his business had ‘fallen off a cliff’ but rather that it remained viable and profitable, albeit on a smaller scale. As such the husband’s application to set aside was refused. The husband’s evidence to his bank seeking funding predicted a recovery of his business profitability which was supported by industry experts.
Ultimately, the court noted that the Barder threshold is deliberately set very high for sound public policy reasons to preserve the finality of litigation. The court noted that there had not been a tsunami of coronavirus pandemic-related Barder applications, which tends to suggest that exceptionality is still holding good, even in difficult times.
This analysis was first published on Lexis®PSL on 11 May 2021 (subscription required).
Maria Scotland practices exclusively in family law with a specialism in high-end/ big money financial remedy applications and (private law) children work. She accepts instructions to act through a solicitor or directly from members of the public on a Direct Access basis. Maria is ranked in the Legal 500 in family law (including divorce & financial remedy). She is one of the leading family law juniors and is the joint head of the Family Team at 5SAH.
