Barder: Exceptional and rare

21 October 2021

Neither of the decisions in S v T and HW v WW represent a restriction or characterisation of the Barder principle, but rather affirmation of its exceptionality, even in these most unusual times.


The family courts have recently had cause to consider the application of the Barder principle (per Barder v Barder (Caluori intervening) [1988]) in the decisions of HHJ Hess in S v T [2021] and HHJ Kloss in HW v WW [2021]. In both cases, the parties had suffered significant financial losses (or potential losses) as a result of external events beyond their control, yet neither of the applicants’ Barder arguments succeeded. Do these decisions represent a restriction of the Barder principle, or simply an affirmation of the exceptional nature of such cases, and the appropriately high threshold which must therefore be met?

S v T [2021]

The applicant wife in S v T sought to revisit a consent order on the basis of the impact of cladding issues on the value of the former matrimonial home, which had net equity of circa £450,000 and represented the biggest asset in the case. The settlement reached at the financial dispute resolution (FDR) appointment required her to pay a lump sum to the husband within 60 days of the sealing of the order and provided for her to retain the  former matrimonial home. Although the order did not record how it was anticipated that she would raise that money, her intention had been to remortgage the former matrimonial home and on that basis she had made preliminary enquiries of her mortgage provider before the FDR.

Post-FDR, in the course of progressing the wife’s borrowing application, a surveyor was instructed. The surveyor identified that there appeared to be no fire safety certificate in place, and, in reliance upon government guidance put in place after the Grenfell Tower tragedy, declined to provide a valuation for the property until such a certificate was available. At the point at which this potential issue first came to light, decree nisi had not yet been pronounced, and so the agreement existed only as a Xydhias v Xydhias [1998] agreement, recorded in heads of agreement.

Despite this, alongside seeking to resolve the remortgaging issue, the wife pressed ahead with the consent order process after decree nisi was pronounced, and did not inform the husband of the potential issue until after the order had been submitted to court for approval. The order was approved in November 2019, and the wife spent the following months seeking to resolve the issue, including by approaching alternative lenders and borrowing £50,000 from elsewhere to be paid to the husband on account of the lump sum. In June 2020, confirmation was received that the cladding needed wholly replacing, at a potential cost of £40,000 per flat, and with a best guess as to timescale for the repairs of three years.

The husband applied to enforce the lump sum payment, and the wife applied to set it aside, with a view to the husband’s lump sum being reduced downwards and her remaining living  in the former matrimonial home. HHJ Hess relied on Mostyn J’s guidance in DB  v  DLJ  [2016] as to the difference between a ‘true’ Barder case, whereby the relevant facts arise after the date of the order, and cases which actually concerned mistakes or ‘known unknowns’, whereby the relevant facts exist at the time of the order, but are unknown. The judge found that this case fell into the latter category. He found that the wife had not satisfied the requirements of a mistake case particularly because the wife chose to take the ‘calculated gamble’ of proceeding with the order as drafted after she had learned of the cladding issue (albeit before she learned of its full extent). She could not, therefore, present the severity of the issue as it eventually transpired as an unforeseeable event at  the relevant date, being the date on which the order was made. He also relied on the fact that, had the wife waited for the full cladding inspection report before progressing, she would have discovered the full extent of the issue – she had not acted with due diligence in that regard.

The final point HHJ Hess relied upon was the availability of alternate relief to resolve the issue. That alternate relief came in the form of his decision to make an order for sale, but to delay its implementation pending the cladding issue being resolved, in the hope that this would avoid the property being sold for a lower value before that stage and the wife being financially disadvantaged as a result. The husband would be compensated in the form of judgment rate interest and the wife being responsible for any capital gains tax payable by him due to the delay.

HW v WW [2021]

HW v WW concerned a husband’s attempt to rely on the Barder jurisdiction to reopen a financial settlement reached at FDR on the basis of him retaining the risk-laden business asset. His wife of 24 years received the former matrimonial home, with equity of around £461,000, the proceeds of sale of another property (circa £68,000), and was due to receive a series of lump sums from the husband. Her 50% shareholding in the business, a    wholesale distributor of printers and photocopiers, was to be transferred to the husband, who would become the sole shareholder of a business with a gross value of around £3.5m (per the single joint expert). The wife therefore received only 39.8% of the capital assets and 32.8% of the pensions, after a long marriage, but this was on the basis that she was receiving the security of the copper-bottomed cash and property assets. HHJ Kloss  observed that the settlement reached was ‘sensible, standard and above all fair’.

The FDR took place on 12 March 2020 and the first lump sum was due for payment on 10 June 2020. Five days before it fell due, the husband applied to ‘stay’ the lump sums for 12 months, with provision for a review after nine months. His application was based on the ‘catastrophic impact’ which he said Covid-19 had had on his ability to raise those sums. The wife then filed an enforcement application in October 2020, and in November 2020 the husband applied to set aside the order on Barder grounds, citing ‘circumstances that were unforeseen and unforeseeable’, which had ‘significantly changed the assumptions upon which the order was made’. He said that there had been a substantial change in the value of shares in the family company and so too in his ability to pay the lump sums ordered, flowing from the economic impact of the Covid-19 pandemic.

The husband claimed that, while the pandemic was known about at the FDR, it was not foreseen or foreseeable that it would develop and endure as it had, and/or that it would have the impact that it had, which he asserted included a 38% drop in turnover, the loss of the company borrowing facilities he had intended to use to pay the lump sums, and a very bleak long-term future for the company.

HHJ Kloss rejected the wife’s argument that the financial impact of Covid-19 fell within the Myerson v Myerson [2009] ‘natural processes of price fluctuation’. He considered (at para 85) that:

The Covid-19 pandemic is an extraordinary event, different in nature and scale, to any similar world event in the lifetime of the parties. This is not an issue of market volatility which is periodically experienced, neither is it a national issue with predictable localised causes. It is akin to a war, with tentacles spreading across the world. I therefore find that in principle, the Covid-19 pandemic can open the door to a successful Barder claim.

He further accepted that the husband had met the timing requirements for a Barder application.

The husband’s application failed, however, on the question of foreseeability. The judge rejected the husband’s arguments as to the specificity of outcome he would have needed to foresee, and preferred the wife’s arguments on this point. He concluded that the husband would only need to have foreseen a risk that the pandemic might have a significant impact upon the trading position of the company. The judge found that, although the husband himself may not have foreseen it, the risk was foreseeable. He considered the timeline of key world events leading up to the FDR and found that, with those in mind, the husband  was on notice of ‘significant and developing world events, which might well have had a practical and financial impact upon the population of the UK’. Given this finding, the husband could not successfully establish a Barder claim.

HHJ Kloss further found that, even if the husband had succeeded on the foreseeability point, the impact of Covid-19 on the company was not sufficiently fundamental to meet the Barder threshold. This was particularly so in circumstances where it transpired that the husband had recently provided far more positive projections as to the business’s recovery to his bank than he had to the court, but also given that the husband and industry experts were expecting some undefined level of future recovery.

The judge was also influenced in his decision by the fact that the husband had chosen to take a settlement which involved him receiving the risk-laden assets, noting that:

It is axiomatic that if a party chooses pressure and risk, it is a very steep hill to climb to avoid the downside of that risk.

The wife had also taken a gamble in giving up the business assets and, had the business been in a different sector, such as the supply of PPE, she would not have been able to seek an increase in her award. HHJ Kloss therefore dismissed the application but encouraged the parties to try to find a consensual way forwards given the husband’s obvious cash flow and borrowing difficulties.

Key considerations

Both of the above cases therefore failed on the issue of foreseeability, with the applicants falling foul of the known unknown difficulty identified by Mostyn J in DB v DLJ:

… where at the time of the order a thing is known and assumed but in fact later eventuates to an extent that was not expected.

This sounds a note of caution for parties at FDR (or in the immediate aftermath) who may elect to put an emerging issue to the back of their mind, or dismiss its potential relevance entirely, in the interests of reaching an immediate resolution – Barder will not prove their saviour should the issue escalate.

Litigants should also be cautious of focusing on Barder to the exclusion of other potential remedies. HHJ Kloss noted that the husband in HW v WW had ‘put all his eggs in the set aside basket’ and had not explored the court’s powers under the liberty to apply provisions, the inherent jurisdiction or the Thwaite v Thwaite [1981] jurisdiction. HHJ Hess noted that the wife in S v T could have raised the emerging cladding issue as an Edgar v Edgar [1980] vitiating factor and declined to approve the consent order on that basis. He also noted the possibility of the wife pursuing a negligence claim against the valuer who had not picked up on the cladding issue during the original proceedings.

Both cases also prove a useful reminder of the importance of timing when it comes to Barder applications, particularly given HHJ Hess’s finding in S v T (at para 22(i)) that the relevant time for assessing whether or not the set-aside test was met was when the order was made, rather than the date of the FDR. The wife in that case faced particular difficulty because of the two-month gap between the FDR agreement being reached and the order being made, which resulted in part from decree nisi not having been pronounced pre-FDR. Had such a delay not ensued, she may not have learned of the cladding issue before the approval of the order, and so would not have faced the same criticism for failing to raise the issue in that period. Litigants who encounter issues during such an interlude should carefully consider whether to raise them, or consider applications to reopen matters, before the order is submitted to court for approval.

HW v WW also serves as a warning to parties accepting a settlement made up of risk-laden assets of the difficulty they may face in returning the matter to court should that risk go against them in future. HHJ Kloss noted, in exercising his discretion, the speculative  position the husband had taken in agreeing to a settlement which provided for the wife to retain the entirety of the copper-bottomed assets. In accepting the possibility of suffering should the business not do well, he made it harder later to argue that he should not have to accept the financial difficulties which transpired. Similarly, the wife in S v T, in pressing ahead with the consent order despite the emerging cladding issue, had taken the risk of that issue presenting borrowing difficulties for her, and suffered the consequences of that decision.

It can be seen from the above that the applicants in S v T and HW v WW fell foul of fact- specific hurdles arising in particular from their knowledge, or information which should have been in their contemplation, at key points in time. Neither of the decisions in S v T and HW v WW represent a restriction or characterisation of the Barder principle, but rather affirmation of its exceptionality, even in these most unusual times. It is certainly feasible, as accepted by HHJ Kloss, that litigants affected by cladding issues or the Covid-19 crisis could satisfy the Barder requirements, but it may well be that those cases which most evidently reach that threshold will not require re-litigation for that very reason, and will be resolved by agreement instead.

Conclusion

When contemplating a Barder application, litigants must always have in mind Thorpe LJ’s observation in Richardson v Richardson [2011] that successful Barder cases:

… are extremely rare, should be regarded by the specialist profession as exceedingly rare, and should not be thought to be extendable by ingenuity or the lowering of the judicially created bar.

These recent judicial refusals to apply the Barder jurisdiction serve only to emphasise that it retains this highly exclusive but nonetheless important role.

This article was first published in the September 2021 edition of Family Law Journal.

Cases referenced

  • Barder v Barder (Caluori Intervening) [1988] AC 20
  • DB v DLJ [2016] EWHC 324 (Fam)
  • Edgar v Edgar [1980] EWCA Civ 2
  • HW v WW [2021] EWFC B20
  • Myerson v Myerson [2009] EWCA Civ 282
  • Richardson v Richardson [2011] EWCA Civ 79
  • S v T [2021] EWFC B11
  • Thwaite v Thwaite [1981] 2 FLR 280
  • Xydhias v Xydhias [1998] EWCA Civ 1966

 

Further information

If you have any questions about the issues raised in this or other blogs in this series, please contact a member of our family and divorce team

 

ABOUT THE AUTHOR

Cate Maguire is an associate in the Family Team, advising clients on matters including divorce and civil partnership dissolution, associated financial issues and issues surrounding children. She has particular expertise in jurisdictional issues and complex financial matters.

 

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