Covid does not invalidate divorce settlements, Judge rules

By 14 March 2022News

The High Court has rejected a claim that the Covid-19 pandemic should invalidate a divorce settlement agreed in 2019.

In BT v CU, the husband owned a successful business providing school meals. On October 10 that year, a four-day hearing in the family courts reached its conclusion with an order that the husband make a series of lump payments to his estranged wife, beginning with £150,000, followed by four payments of £200,000 at yearly intervals, for a total of £950,000. The Judge also issued a pension sharing order and specified child maintenance and school fee payments for the couple’s two teenage children.

Overall, the divorce settlement constituted a 58 to 42 per cent split of the couple’s assets of nearly £5 million, in favour of the husband. This unequal division reflected the fact that the school meals business predated the couple’s marriage and was also an acknowledged that its future value was uncertain.

Just months after the financial settlement, the Covid-19 pandemic reached the UK. In March a national lockdown led to the closure of schools across the country. The following month the husband filed an appeal with the courts, arguing that Covid had had such a detrimental effect on his business that it constituted a ‘Barder’ event. This term refers to an unanticipated occurrence after a legal order has been issued. Provided this event meets certain criteria, the court may allow late or ‘out of time’ appeals against previously issued legal orders.

The two key criteria required for a successful appeal are:

1/ The unexpected development fundamentally changed the basis on which the legal order had been issued.

2/ The event occurred not long after the order was issued – in most cases, not more than a few months.

In addition, the appeal must be made promptly, the event must have been genuinely unforeseeable, and a successful appeal must not unduly prejudice the interests of other individuals involved in the case.

These conditions are known as the ‘Barder principle’.

The business owner in BT v CU claimed he would be unable to make the remaining payments to his wife thanks to the downturn in his business, so the settlement should therefore be revised and certain parts removed. At a hearing in the Family Division of the High Court, Mr Justice Mostyn expanded on this argument:

“He contended that the arrival of the pandemic was both unforeseen and unforeseeable, and its impact had caused devastating financial consequences which invalidated the fundamental assumptions on which the final order was based. As a result, he claimed that he was unable to discharge his unpaid obligations under the order.”

In court, arguments centred around the true effect of Covid-19 on the turnover of the firm. By the time of the hearing, schools in England and Wales had reopened and the Judge was doubtful about a projected continuing downtown of ten per cent.

Mr Justice Mostyn eventually concluded that Covid-19 did not constitute a Barder event:

“It sounds highly dramatic to plead that a business has been grossly impacted by the once-in-a-century global Covid-19 pandemic (as here), but au fond [at bottom] such a case is no different in substance to one where a business was devastated by the impact of the 2008 Global Financial Crisis. A reasonable but well-informed person may well have given in 2019 a very different answer to the question:

‘What chance do you see of a global pandemic arising in 2020 which has the result of wiping out this business’s operating profit?’

to the question:

‘What chance do you see of a global financial crisis arising in 2020 which has the result of reducing this business’s turnover by 10%?’ ”

The husband’s application was dismissed.

Read the full ruling here.

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