Many clients may find that following a final order being made within financial remedy proceedings that they are suddenly unable to pay Lump Sum Orders due to the economic impact of the coronavirus.

Consideration should be given as to the merits of an application for the Lump Sum Order to be set aside and the application be made promptly.  The application should be made under the Part 18 procedure supported with a witness statement and evidence of the financial impact of the coronavirus on the individual resulting in them being unable to meet the Lump Sum Order.

Many businesses, particularly within the hospitality and travel industry, have suffered significant economic difficulty due to COVID-19.  The financial, economic and social landscape has changed dramatically.

The court would need to be satisfied that the applicant’s circumstances have been significantly altered following the agreement/order being made.  Of course, section 31 Matrimonial Cause Act can be used to vary an order, but there is no statutory route to vary a capital order nor an opportunity to change the finality of the order.  In addition, the court’s ability to alter or set aside Lump Sum Orders is extremely limited and it notoriously difficult to satisfy the court that a ‘Barder event’ has taken place for fear that the floodgates may be opened to further cases.

However, if the applicant can demonstrate that the change in their financial situation was ‘unprecedented’ due to COVID-19, it may be arguably unfair to hold the applicant to the financial order made prior to the coronavirus as it was made prior to having any knowledge of this most potent coronavirus or its likely effects.

The test for whether a ‘Barder event’ is said to have occurred is laid down in Barder v Barder [1988] AC20 and will have occurred if;

1. A new event which invalidates the basis, or fundamental assumption, upon which the final order was made;
2. The supervening event happened shortly after the making of the order (within a few months);
3. The application to set aside the order is made promptly;
4. Set aside will cause no prejudice to third parties who have acquired interests in the property in good faith for valuable consideration.

Therefore, it will be first important to show that the economic impact of the coronavirus upon the applicant was unforeseen and unforeseeable causing a dramatic change in the valuation of the assets (Cornick v Cornick (No.1) [1994] 2 F.L.R. 530).  This will have to invalidate the basis or fundamental assumption upon which the final order was made. 

The needs and circumstances of the applicant will also need to be evidence as altered for the circumstances to be considered truly exceptional.  Consideration will need to be given as to whether it was reasonable to expect the applicant to seek out alternative employment, the applicant’s earning capacity, ability to raise a loan, the future of the business and financial ability to meet their own needs.  This will need to be discussed within the circumstances of the case and the proportion of the assets affected.

There must be a real element of unforeseeability for a ‘Barder event’ to have said to have occurred.  It is likely to be found that the closing of businesses is simply a shift in the market.  However, in truly exceptional circumstances, it may be possible to demonstrate a ‘Barder event’ as a result of the pandemic, particularly if the applicant previously had an asset base which was considered a relatively ‘safe’ income-producing asset.

The success of such applications are currently speculative.  However, moving forward during these uncertain times, and with the threat of a second wave of the coronavirus this winter, consideration must be given to both recently concluded proceedings and to current proceedings for safe valuations and asset distribution.