HW & WW: Husband fails with claim that pandemic is a Barder event
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Since it struck there has been much discussion in family law circles of the question: could the pandemic constitute a Barder event? The case HW & WW, decided by His Honour Judge Kloss in the Family Court at Leeds in March, confirms that it could, at least in theory. But the bar remains high, and Judge Kloss clearly does not anticipate a flood of successful pandemic-based Barder applications.
The parties in HW & WW reached an agreed settlement at an FDR on the 12th of March last year. A consent order, approved by the judge on the following day, included provisions whereby the husband was to pay to the wife a series of lump sums totalling £1,000,000 by 12/4/22, the first lump sum of £750,000 payable by 10/6/20.
The primary asset was the husband's company, which trades in the wholesale distribution of commercial photocopiers, printers and associated computer software solutions. The company was valued at the time of the order at some £3,500,000.
The husband did not pay the first lump sum, and on 22/11/20 he applied to have the order set aside, on the basis that ‘circumstances that were unforeseen and unforeseeable have significantly changed the assumptions upon which the Order was made’ and he ‘cannot now meet the terms of the Order’. He relied upon the substantial drop in the value of the company as a result of the pandemic - down to some £1,265,000.
Judge Kloss found:
1. That the pandemic, being "an extraordinary event, different in nature and scale, to any similar world event in the lifetime of the parties", and its impact upon a key asset, was a potential Barder event, opening the door to set aside.
2. That the timing in this case of both the pandemic (the first lockdown occurred just 9 days after the deal was done), and the husband’s application left that door open. As Judge Kloss stated:
"If the Husband had launched an application too swiftly, he would have been justly criticised for jumping the gun at a time where a proper analysis of the nature and effect of the Covid 19 pandemic could not be made. He had marked the difficulties that the Company was facing in Solicitor’s correspondence at the end of 4/20 and had issued a dubious ‘stay’ application in 6/20, but did not pull the Barder trigger until 2/11/20. By that stage, the financial impact could at least be evidenced. The timing of his application was therefore right at the outside, but still within, the acceptable window of opportunity."
3. However, the risk of the event, as properly defined, was reasonably foreseeable to the husband. At the time of the settlement the husband "was on notice of significant and developing world events", and agreed to the order notwithstanding those events. He did not foresee it, but in all the circumstances judge Kloss found that the event, as properly defined, was foreseeable. The full extent of the impact plainly wasn’t, but that is not required. The husband's application therefore failed.
4. In any event, an overall assessment of the impact of the pandemic and more general factors led the court to exercise its discretion against the husband. There was no doubt that the company had suffered as a result of the pandemic, but it appeared that it was likely to 'bounce back' to to profitability by 2022. The change was not fundamental enough to meet the Barder test, which is deliberately set high. As Judge Kloss stated: "The fact that there has not yet been a tsunami of Covid 19 pandemic Barder applications before the Courts appears to suggest that exceptionality is still holding good, even in these difficult times, although I accept that cases may be in the pipeline and/or other remedies pursued". And as he also stated: "If the deal was done now or an outcome imposed, there would probably be a different outcome from 3/20, but that is very often the situation in Barder applications where there has undoubtedly been change."
Accordingly, the husband's application was dismissed, although Judge Kloss indicated that there may obviously have to be consideration given to the order being varied as to timing.
The full judgment can be read here.