Parklane Plowden Chambers Logo
Parklane Plowden Chambers Logo

News & Events

The Pandemic: a Barder event?

A year ago, my inbox was full of enquiries as to whether orders could be set aside in reliance upon Covid-19 as a Barder event. One client had lost £6 million in share value on a single day in March 2020 and was understandably surprised to hear that he could not automatically go back to court to change the arrangements into which he had entered, by consent, just a few weeks earlier.

Written by Francesca Fothergill.

 

Since that time, I have advanced, and defended, the Covid-19 Barder argument on several occasions, and each time the court has indicated that it found no merit in such arguments. On each occasion, reference was made by the Judge to Myerson v Myerson (No2) [2009] EWCA Civ 282 and the Barder arguments were given short shrift (admittedly at FDR stage).

In my experience, the Court is very slow to re-open orders which have been properly made, even in the face of an argument that the extent of the pandemic took matters outside the foreseeability of a ‘normal’ financial downturn.

In Myerson, the Court of Appeal was clear that the natural process of price fluctuations do not satisfy the Barder criteria. Myerson of course followed the judgment of Hale J (as she then was) in Cornick v Cornick [1994] 2 FLR 530.

We now, finally, have some guidance on the Barder point in the specific context of Covid-19, by way of the short judgment of Cohen J in FRB v DRC (No 3) 2020 EWHC 36969 (Fam).

The facts of the case, put briefly, were:

  • H applied to vary the timing and quantum of the lump sum provision of £49 million which had been ordered, alternatively for the final order to be set-aside and re-quantified on Barder grounds;
  • By way of background a final hearing took place in January – February 2020 and the draft judgment was circulated on 28 February 2020. At a hearing on 27 March 2020, H asked for the case to be adjourned to September 2020, by reason of the onset of Covid-19 and its then unknown consequences. His application was refused. This may in no small part have been by reason of the Judge’s general assessment of H in respect of whom he made ‘condemnatory findings’  as to a lack of disclosure and honesty;
  • A question arose as to liquidity and the timing of payment of the lump sum by H;
  • H elected to make a cash payment to W, rather than an asset transfer, and the dates of payment were £30m within six months and £19 million within 18 months;
  • H application to vary/set aside was made two days before the expiry of the first six  month period;
  • H application referred to an “enormous reduction in my financial worth and that of my family which I am currently unable to fully quantify”
  • Cohen J observed that H statement focussed upon broad assertion as to global macro-economic circumstances arising from Covid-19, with precious little analysis or detail in relation to the specific effect on the value of his assets which the Court had been concerned with at final hearing
  • H sought a complete re-valuation of all his assets, which would cost ca. £300,000 - £400,000 plus taxes and which would take ca. six months to complete
  • Cohen J opined that it would be ‘exceptional for the court to vary the quantum of  lump sums in circumstances markedly different to those which would justify a Barder variation’
  • H application failed; it was evidentially weak. H had failed to provide prima facia evidence of a fundamental change in his wealth. He had failed to establish a ‘collapse in  his global fortune’. He had failed to provide any explanation for the supposed change in his ability to pay as between 27 March 2020, when the timescales volunteered by him were embodied in the order, and the date of his application
  • As with Myerson, the fact that H had chosen to retain the risk laden shares, rather than to transfer assets, did little to assist his application.

 

Whilst the pandemic did not constitute a Barder event in this case, I do not consider that the judgment of Cohen J shuts the door on such an application in an appropriate case. It is clear from the judgment that any application must be evidentially strong and supported by very detailed evidence.

Cohen J referred to the absence of underlying documentation provided by H in support of his application (trading figures, P & L accounts, valuations) which would be required to satisfy the Court. It is no good coming to court with an application which merely suggests that, upon further inquiry, the might be some specific downturn in value. It is now clear that particular sectors have been more affected than others and in a very specific case, the Court may be more inclined to accede to a Barder application.

However, it must be noted that the Court will always adopt a long horizon when considering changes in value. As Cohen J noted, at some stage, ‘the world economy will be back to where it was’. Stock market indices have now bounced back to above pre-Covid-19 levels.

Barder applications are always difficult to predict, with the risk of significant adverse costs orders.  Caution is required. Ultimately, I would lean more towards some form of ADR and a negotiated outcome rather than launching my client into an unpredictable further piece of litigation.

 

Francesca Fothergill is a member of Parklane Plowden's Family: Property and Finance team. To view Francesca's profile, click here.

Share on

Facebook Twitter LinkedIn

Awards &
Accreditations

View All Awards 

Connect
TwitterLinkedIn