Is Covid-19 a Barder Event?

  • Category: Family
  • 25th March 2020
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By Leisha Bond, Specialist Family Barrister

Most involved in the legal world will know of the tragic 1988 Barder v Barder case.

Now, in an uncertain world since the coronavirus, we ask if this infamous case is applicable to the new climate and is the pandemic a Barder event?

For instance, Imagine Mr X and Mrs X ‘did a deal’ in January 2020.  Mr X kept his business, valued at £500k (principally goodwill) and his income stream.  The rationale was he could take  some liquidity out of the business by way of dividend and put down a deposit on a house and use his income to pay the mortgage, whilst Mrs X kept the £500 k house.

Fast forward to now and  Mr X has been told by the government that he has to close his business.  He can apply for loans and defer tax and the like, but the reality is his business is virtually worthless.  If the matter was being decided in March 2020 there is no way he would have agreed to sign the house over to Mrs X.  There is no way the court would have ordered this.

So Is this a Barder event?

It’s open to question, but I think it technically is for consent orders made recently, but not any orders you agree going forwards.  However that doesn’t mean the court will in fact treat it as a Barder event for fear of floodgates.

 The Barder Case

‘Barder’ events were born out of the tragic case of  Barder v Barder (Caluori intervening) [1988] AC 20, [1987] 2 All ER 440 (1) and relies on new events occurring which invalidate the basis upon which the order was made.

Since the decision in Barder, the majority of the applications for Barder appeals have failed and it is a notoriously high-risk application to make.

However, there is an important legal principle of finality of litigation :  Cornick v Cornick [1994] 2 FLR 530

Barder and Cornick principles were  considered in Myerson v Myerson  [2009] EWCA Civ 282, in the context of massive fluctuations in the value of shares and property.

It was held that 90% drop in the Husband’s share price was a ‘natural process of price fluctuation’ and is not enough to reopen an order.

But perhaps the real reason for the dismissal of the appeal was the fear of floodgates?

The case law, as a whole, seems to close the door on a  Barder appeal based on a change on the value of assets,  however big the drop.

Was Covid 19 foreseeable ?

But is Covid 19 more than ‘the natural process of price fluctuation’? Is Covid 19 part of the speculative nature of shareholding? I would suggest not.

Some cases of pneumonia were reported in China, on 31 December 2019. One week later, Chinese authorities confirmed that they had identified Covid-19.  On 11 March 2020 the World Health Organization declared the outbreak a pandemic.

The fiscal measures introduced  by the UK Government are unprecedented.

The test of foreseeability is an objective one.  Cutting a lot of legal debate and law down into a simple sentence, was it reasonably foreseeable? I suggest Covid 19 was not.

This is a worldwide pandemic the likes of which have not been seen in any of our lifetimes. We will not go back to how we were before, whatever the financial position.  Significant numbers of people will die.  The way companies organise themselves post Covid 19 could well change.  None of this was, I would suggest, foreseeable.

The courts are likely to be VERY fearful of floodgates.  But, personally, for deals done in the last few months, before Covid 19 was a household word, I think there is a real argument that this IS Barder.

Going back to my original scenario with Mr and Mrs X.  The change is because an animal passed a virus to a human in China in December.  We didn’t know about it until this year, after the deal was done.  By the time the order takes effect we are locked down and the world has changed forever.  How is that NOT a Barder?  I say it is.  The question is will the courts treat it as a Barder?  I suggest they should.  But the fear of ‘floodgates’ means they could get creative.  It wouldn’t be the first time.

Anyone doing a deal now will be doing so on the basis of  a ‘known unknown’ and the parties take the risks, eyes wide open.

But if you have done a deal within the last few months I, for one, think we MIGHT be in Barder territory.

THIS IS A SUMMARY: For full text see https://leishaonlaw.wordpress.com/