The Impact of the Pandemic on Financial Orders

Setting aside financial orders

Financial Orders made prior to March 2020 may now be difficult to implement and/or enforce due to financial hardships caused by the impact of the pandemic on the economy. This was particularly an issue when a financial agreement was reached based on one party perhaps retaining more of a risk-laden asset – i.e. a business – which has been more vulnerable to the economic fluctuations.

In the recent case of HW v WW [2021], the parties’ assets included properties, pensions and a company valued at £3.2 million, in which both the husband and wife had shares. Nine days before national lockdown in March 2020, an Order was made reciting that the husband would retain the business, whilst the wife would retain the properties and would receive lump sums equivalent to £1 million. The husband, therefore, wanted to reopen the case, as the Order created a very unfair outcome.

The approach: Barder v Barder [1987]

To have an order set aside, whether made by consent or otherwise, there needs to be “a subsequent event, unforeseen and unforeseeable at the time the order was made, which invalidates the basis upon which the order was made” (FPR PD9A 13.5).

The case of Barder sets out four primary conditions which the Court will consider to determine whether the event satisfies the test:  

• That a new event has occurred since the making of the Order which invalidates the basis on which the Order was made;
• That the new event occurred within a relatively short time of the Order having been made;
• That the application for leave to appeal out of time should be made reasonably promptly in the circumstances of the case; and,
• That the grant of leave to appeal out of time should not prejudice third parties who have acquired interests in the property subject to the Order.

The decision in HW v WW [2021]

The husband’s case comprised of the following main arguments:

• The “new event” was the impact of the Covid 19 pandemic on the Company value, which in turn impacted his ability to make the lump sum payments (invalidating the basis of the Order);
• Although the pandemic was known about in early March 2020, at the time of the hearing, how it would develop was simply unforeseeable; and
• The application was made in good time and within eight months of the Order.

The wife argued that the pandemic was not unforeseen as it was known at the time of the hearing. She said that the evidence the husband was relying on was insufficient and that there were assets within the company that could be sold, such as properties, to raise the money.  

Ultimately, HHJ Kloss reached the decision that the impact of the pandemic, although it was not foreseen, was foreseeable. In his judgment, he found “not without some hesitation” that the risk to the company caused by the Covid 19 pandemic “was indeed reasonably foreseeable”. His judgment referred to the declaration by the World Health Organisation that there was a global pandemic and the resultant plunge in the stock market along with lockdowns had already started to occur globally.  

This case underscores the tough approach of the Courts when determining whether the event in question satisfies the threshold to have an Order set aside.

This case highlights the need for accurate business valuation advice at an early stage to consider possible future likely events.

Here to help

If you require assistance with your finances as part of a separation or divorce, please get in touch with a member of our Family Solicitors on 0161 941 4000 or email the Family Law Team.