Covid and Barder : FRB v DCA (No 2) [2020]

FRB v DCA (No 2) [2020] EWHC 754 (Fam), Covid and Barder, variation of lump sum by instalments, interest, costs.

Following a final order, there are very narrow grounds upon which Barder events permit a re-opening of the capital aspects.  Is covid one of them?  The finality of litigation being a strong and important principle upheld by courts.

Lump sums payable by instalments can be varied under MCA s31(2)(d) but attempts to re-open cases on the basis of a change in asset value often fail, there being a difference between the natural fluctuations in market values and an unforeseen event.

In 2009 two cases Myerson[2], and Horne[3] attempted to re-open cases due to the economic collapse but failed, courts saying it was a natural process of price fluctuation.

In FRB v DCA (No 2) [2020] EWHC 754 (Fam) Cohen J, H who (inter alia) had significant interests in international hotels, tried to re-open a financial remedy order in which he had been ordered to pay £64m to W, comprising the FMH worth £15m, and a lump sum payable by instalments of £49m, first payment due by 30 September 2020.

On 28 September the H applied to vary the lump sum payable by instalments, firstly the overall quantum and then the timing of the payments.  He also sought to have the lump sum order set aside under the Barder jurisdiction and re-quantified.

Cohen J dismissed H’s applications, and considered the following:-

Lump sum variation - Cohen J said that whilst he had jurisdiction to vary the overall lump sum quantum under s31 MCA 1973, it would have to be "exceptional" to do so in circumstances markedly different from those which would justify a Barder variation. 

The husband's failure to provide prima facie evidence that there had been a fundamental change in his worth so as to justify re-opening the settlement was fatal to his case[4].

Anyone considering applying to set aside an order based on the financial implications of Covid-19, should take a "long term" view.

Interest on late payment of the first lump sum - Interest could not be awarded because there was no decree absolute so the judge increased the wife's periodical payments by an amount equivalent to the interest which would be payable.

Interest on forthcoming lump sums not paid - The final order had provided that in the event of late payment interest would be payable at 4 per cent or such higher rate as the court may subsequently order, and the wife applied to increase the rate to the judgment debt rate of 8 per cent. Cohen J considered that in the current economic climate it would be "excessive" to order interest at 8 per cent.  Further, whilst the order had provided for the entire lump sum to become immediately payable if the husband defaulted on the first instalment, Cohen J declined to order interest on the second instalment as he considered that would be "oppressive" in the current financial circumstances.

Costs - The presumption of no order as to costs does not apply in set aside applications, and the husband was ordered to pay 80 per cent of the wife's costs.

Any application under Barder needs an unforeseen event and good evidence of the actual loss suffered due to the unforeseen event. 

Cohen J may have been swayed by not wanting to open any covid application floodgates. In conclusion, careful thought needs to weigh up the courts principle of finality of litigation, with the actual causation of diminution of value.

However an application under Barder or to vary, could be based on poor health or death resulting from covid.  Other non-capital applications eg periodical payments may be best dealt with by negotiation bearing in mind the costs of litigation.

[2] Myerson v Myerson (No 2) [2009] EWCA Civ 282

[3] Horne v Horne [2009] EWCA Civ 487

[4] H’s evidence concentrated on the worldwide downturn in business and failed to adequately provide evidence of the actual financial damage he had suffered