Sarah Hughes, Solicitor
Family Law - July 2008
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In one of our recent cases, the husband and wife agreed a financial settlement within divorce proceedings. The parties owned two properties, the family home which was in joint names and a cottage in the wife’s sole name. The settlement provided that the family home was to be sold and the wife was to receive a lump sum in excess of her agreed share. This was agreed on the basis that the husband would in return receive security by way of a charge over the wife’s cottage for the excess amount. The wife was then to refurbish and sell the cottage in order to repay the excess to the husband upon sale. However, before this agreement could be implemented the wife’s cottage unexpectedly burned down and consequently there was no property existing which the husband could secure his interest against. It was therefore decided by agreement that the original order would no longer be valid and should be set aside and renegotiated to reflect the current situation.
This is an unreported case which was settled by negotiation. However, cases such as these are litigated often following the landmark decision of the House of Lords in Barder v Barder (reported as Barder v Calouri (1988) AC 20).
Barder v Barder - the facts
The husband and wife had been married for over ten years and had two young children. The wife instigated divorce proceedings and the financial proceedings were finalised by a Consent Order on 20 February 1985. Under the terms of the Consent Order the husband was to transfer to the wife his legal interest in the family home within 28 days. The husband was also to make substantial periodical payments for the benefit of the children. However the wife tragically killed their two children and committed suicide on 25 March 1985, only five weeks after the conclusion of the Consent Order. The husband applied to the Court for permission to appeal out of time and set aside the Consent Order, arguing that the circumstances had been fundamentally and unforeseeably altered by the untimely death of his family. The application was opposed by the late wife’s mother, who was the sole beneficiary of the wife’s estate and wealthy in her own right.
Barder v Barder - the decision
On appeal to the House of Lords it was unanimously decided that the Consent Order should be overturned. In his leading judgement, Lord Brandon started by establishing that there is no general rule of abatement in divorce cases and then went on to set out the four conditions that must be met before leave to appeal out of time is granted:
- A new event must have occurred since the original order which invalidates the fundamental assumption upon which the order was made. This is a question of merit.
- The new event must have occurred within a relatively short period of time following the order.
- The application for leave to appeal must be brought reasonably promptly in the circumstances.
- Granting leave must not prejudice any third parties who have acquired an interest in property subject to the Order in good faith and for valuable consideration.
In this case, the fundamental assumption of the Order was that the wife and children would need a home for an indefinite period. This had been completely invalidated. The Court also held that the timescale satisfied the second and third requirements as the tragic event had occurred within a few weeks of the order and the husband had brought his appeal within a month of this. Lastly, the Court decided that the wife’s mother would not be prejudiced from setting aside the Order, being wealthy in her own right and not a party intended to benefit under the provisions of the Matrimonial Causes Act 1973. Consequently the House of Lords decided that the husband had satisfied all four conditions and the Consent Order was set aside.
Developments since Barder
The four conditions set down by Lord Brandon have since been heavily relied upon and parties of concluded divorce proceedings have journeyed back to the doors of the Court arguing that their final settlement should be set aside/varied following a so called ‘Barder event’. However, the circumstances in which a Court will accept this argument are very limited.
Death of one of the parties?
The majority of cases concerning the subsequent death of one party do satisfy the Barder criteria and the original orders have been set aside.
In Smith v Smith (1991) 2 FLR 432 the wife committed suicide 6 months after being awarded a lump sum in financial proceedings. The Court held that the wife’s suicide was a Barder event as it had fundamentally altered the assumption that the order was made on i.e. that the wife would need a lump sum for her future needs. The Court therefore reduced the lump sum payable to the wife’s estate.
The same approach was taken recently in Reid v Reid (2004) 1 FLR 736. Under the terms of the order the wife was to get 40% of the net proceeds from the house. However the wife, aged 74, died of natural causes only 2 months after the order was agreed. The husband appealed arguing that her death was a Barder event and her share should be reduced. The executors of the wife’s estate opposed the appeal saying that the death of a 74 year old woman would have been obvious to the Court at first instance and therefore the fundamental assumption was not invalidated. The Court on appeal held that the wife’s death was a Barder event. The Court held that her death had not been foreseeable, notwithstanding the possibility of death at any time, and that the husband had a real need for an increase in the capital whereas the wife’s untimely death meant that she did not. Accordingly, the amount payable to the wife’s estate should be reduced.
However, the death of a party to the proceedings is not sufficient in itself to establish a Barder event. That death must also invalidate the fundamental assumption of the order. This was seen in Amey v Amey (1992) where the wife had been awarded a lump sum in recognition of the contribution she had made to the family business during her lifetime. The Court concluded that her death did not change the extent of her contribution and subsequently the first condition in Barder was not satisfied. The Court also held that the second condition was not satisfied as the husband had initially entered into an agreement with the executors of the estate to vary the terms of the order and only later made an appeal to the Court. The Court therefore held that the appeal had not been brought reasonably promptly and commented that agreements reached freely between parties should not be set aside lightly. See also Benson v Benson (1996) 1 FLR 692 where the wife was diagnosed with terminal cancer and died a year after agreeing a consent order but the husband was prevented from bringing an appeal due to his delay and the fact that he had entered into a prior agreement with the estate to vary the order.
It is also important to note the importance of Decree Absolute in these matters, as was seen in the case of McMinn v McMinn (2003) 2 FLR 823. In this case a financial settlement was made but the husband murdered the wife before Decree Absolute was granted. Although the Court recognized that the murder was capable of being a Barder event, the Court was bound to hold that the appellants had no cause of action due to the absence of a Decree Absolute. Counsel’s argument that the husband should not benefit from his own crime for reasons of public policy was rejected because the husband had not gained anything from the crime; he had only retained the assets he had already owned.
Increase in value of assets?
In contrast to the general approach taken where a party has died, the Courts are increasingly reluctant to recognize an increase in the value of the marital assets as a Barder event.
The leading authority in this area is Cornick v Cornick (1994) 2 FLR 530. In this case the wife was awarded a 51% share of the marital assets. However, the price of shares in the husband’s company subsequently increased to such an extent which meant she had only in fact been awarded a 20% share. The wife applied to the High Court arguing that the increase in value was a Barder event. The application was heard before Hale J who held that the increase was not a Barder event because, although unforeseeable, the shares had been properly valued at the time and the wife should not expect to profit from later changes in her husband’s fortune. An influential factor in the judgment was Hale J’s view that even if the judge at first instance had been able to foresee the dramatic increase in value, it was difficult to see what other order could have been made. Therefore permission to appeal was refused.
This decision was reinforce by the Court of Appeal in Worlock v Worlock (1994) 2 FLR 689. In this case the parties agreed a clean break. At the time the husband was a director of a company but had no control over the capital and the land owned by the company was recorded in the accounts as worth £50,000. Two years after the Consent Order, the mother transferred her shares in the company to the husband and the land was worth £3,500,000. The wife discovered the true value of the land and applied to have the Order set aside. The Court of Appeal held that the increase in value, whilst dramatic, was not a Barder event as it had occurred two years after the Order was agreed.
The same approach has been applied where the asset in question is the matrimonial home. This was first seen post Barder in Edmonds v Edmonds (1990) 2 FLR 202 where the Court of Appeal refused the husband's application to appeal out of time following a dramatic increase in the value of the matrimonial home. In this case a Registrar had valued the property during the proceedings and the husband had disputed the value but not appointed his own expert and when put on the market a year later it sold for a substantially higher price than the value given. The Court held that the value used in the proceedings had not been erroneous and therefore the increase in the value was not a Barder event. Warren v Warren (1983) 4FLR 529 was distinguished.
This reasoning was applied in the case of B v B (2007) EWHC 2472 (Fam). This case concerned a Consent Order which provided that the husband pay the wife a lump sum on a clean break basis either by re-mortgaging or selling the family home. However, his mortgage application took some time and was eventually rejected. When the husband put the property on the market it sold for £600,000 more than the initial valuation. This increase was due in part to the refurbishments carried out by the husband and also due to a natural increase in value over time. The wife’s application to vary the Order was rejected and the Court refused to recognise the increase as a Barder event. The Court held that the husband had complied with the terms of the Order and, being a property developer, it was foreseeable that he would carry out works to the property and was entitled to benefit from the subsequent increase in value.
However, the Courts are much more willing to step in and recognise a Barder event where there has been some fraud, misrepresentation or other bad conduct on the part of one of the parties.
This was first seen in the case of Hope-Smith v Hope-Smith (1989) 2 FLR 56 where the husband refused to pay the lump sum ordered to his wife and then proceeded to frustrate the sale of the property for over a year so that the lump sum could not be paid out of the proceeds. When the house was finally sold it was worth significantly more. The Court of Appeal held that the increase in value was a Barder event and that the wife should receive a larger lump sum than initially ordered as the husband’s conduct had prevented her from enforcing the Order and it would be unjust not to reopen the matter.
The most recent decision in this area is that of the Court of Appeal in Den Heyer v Newby (2006) 1 FLR 1114. In this case, the parties agreed a Consent Order providing the wife with both a capital sum and joint lives maintenance. However, it later transpired that the husband had failed to disclose the details of a windfall he was to share following the sale of his company. The Court held that his failure to disclose the subsequent windfall was capable of being a Barder event. The Court commented that the husband's non-disclosure was even more pertinent given the fact that the Order provided for periodical payments to be made which would be ongoing and variable. See also T v T (1996) 2 FLR 640 where the husband's failure to disclose an offer he had received to buy his shares in his company for £4.8 million was considered fraudulent and therefore a Barder event.
Decrease in value?
The Courts have taken the same strict approach to cases where there has been a decrease in value of marital assets, as was seen in B v B (1994) 1 FLR 219. In this case the husband brought an appeal against the original Order on the basis of a decrease in both the value of the former matrimonial home and his income. The High Court rejected his appeal, stating that his decrease in his income was not serious enough to satisfy Barder and the decrease in value of the matrimonial home was not a Barder event.
However, where there has been bad conduct by one party, the Court is just as willing to recognise a decrease in value as a Barder event as they are an increase. This was seen in Middleton v Middleton (1998) 2 FLR 821 which concerned a matrimonial home which was also a sub post office. With the attached goodwill of the business, the property was worth £69,000. A 50:50 split of the assets was agreed on this basis. However, the husband then deliberately moved the sub post office and lost the goodwill, reducing the value of the house to £652. The Court of Appeal held that the husband had deliberately frustrated the Order and accordingly the dramatic decrease in value was a Barder event.
In addition to this the Courts will also acknowledge a decrease in the value of assets as a Barder event where that decrease makes the Order unworkable. This was seen in Heard v Heard (1995) 1 FLR 970 where the family home was sold for less than half the anticipated sale price and the balance was not sufficient to pay the wife the agreed lump sum and re-house the husband. The Court took a pragmatic approach and held that the decrease in value was a Barder event. The Court stated that although there had been some delay in the husband’s application, this should be looked at in all the circumstances and the reasons for this delay were understandable.
Cohabitation/New Relationship?
The Courts' approach to recognizing subsequent cohabitation is again strict.
In Hill v Hill (1997) 1 FLR 730 the case concerned the renewed cohabitation of the former husband and wife. The parties had divorced in 1969 but then resumed cohabitation as husband and wife for 25 years. When they separated the wife applied to vary the ancillary relief Order of 1969 arguing that the resumption of cohabitation had invalidated the fundamental assumption of the Order. The Court rejected this argument and ruled that the renewed cohabitation for 25 years was not capable of being a Barder event and could not be considered as taking place within a relatively short period of time.
In Wetz v Wetz (2001) EWCA Civ 1521 the case concerned cohabitation with a new partner. In this case the wife had stated that she was in a new relationship but had said she had no plans to cohabit. The wife was awarded a lump sum payable by instalments but 8 months later she began to cohabit and the husband appealed. The Court held that this was not capable of being a Barder event. There was nothing unusual about cohabitation with a new partner, and it had not taken place within a relatively short period of time. The Court decided that the wife had not misrepresented her situation and therefore the appeal was refused.
This was seen again in Shaw v Shaw (2002) 2 FLR 1204. In this case the wife began a new relationship with an affluent businessman with whom she lived on and off. The wife was awarded a lump sum to re-house and some capital to provide her with an income. The husband appealed the decision arguing that the wife was being supported substantially by her boyfriend. The Court of Appeal held that the relationship was not a Barder event. The wife’s relationship had been investigated at the hearing and even if the wife had not disclosed the full extent of the relationship this would not justify any reduction in the Order.
However, it does appear that re-marriage may be sufficient to establish a Barder event following the decision of Williams v Lindley (2005) EWCA Civ 103. In this case the wife was living with her employer but denied that they were in a relationship. The wife was awarded 70% of the family home but then married her employer shortly after. The Court held that the wife had misrepresented her relationship and her subsequent re-marriage to her employer was a ‘clear example’ of a Barder event. The financial agreement had been based on the assumption that the wife had needed a lump sum to re-house and this was invalidated upon her engagement.
In the very recent decision of Dixon v Marchant (2008) which is currently unreported the wife was awarded a lump sum as capitalization of periodical payments, but then remarried shortly after. The Court of Appeal held that the wife's remarriage did not constitute a Barder event. This recent case may indicate that Williams v Lindley is a case to be distinguished rather than followed.
Change in employment relationship?
A small number of cases have sought to establish that a change in a party’s employment status is a Barder event. Again this has been argued with little success.
In Maskell v Maskell (2003) 1 FLR 1138 the judge split the capital assets to achieve a 50:50 division. The husband subsequently found himself unemployed and applied to the Court to have the Order set aside. The Court refused the appeal stating that loss of employment is ‘something that thousands of workers must face’, particularly in the printing trade which was the husband’s occupation, and therefore it was not capable of being a Barder event.
In Ritchie v Ritchie (1996) 1 FLR 898 the Courts refused to accept that redundancy was a Barder event. In this case the husband agreed a financial settlement and then accepted a redundancy package which provided him with a large lump sum and considerably larger pension than previously anticipated. The wife appealed arguing that the acceptance of the redundancy package was a Barder event and that the husband had misrepresented his intention to retire. The Courts rejected this argument and held that redundancy was not a Barder event.
Change in the law?
In S v S (2002) EWHC 223 (Fam) 992 it was argued that the decision in White v White was capable of being a Barder event as the starting point of equality completely invalidated the basis upon which their consent order had been agreed. The Court rejected this argument. The Court recognized that White was a key decision which had affected the Court's approach to ancillary relief cases. However, it took the view that the solicitors involved would have been aware that the decision was pending on appeal and this was the risk taken by proceeding with the hearing.
Bad advice?
And finally practitioners will be pleased to note that Courts have refused to acknowledge the (also arguably unusual!) circumstances of bad legal advice as a possible Barder event.
In Westbury v Sampson (2002) 1 FLR 166 the husband agreed to pay a lump sum to the wife by instalments on the basis of a clean break. However, he was not advised that such instalments were subject to variation. The husband failed to pay the second instalment and the wife’s application to vary the lump sum upwards was granted. The husband appealed stating that his bad advice had invalidated the fundamental assumption of the order. However, the Court rejected this argument stating that the husband had not specifically instructed that the Order should be incapable of change and that the possibility of a loss in the future was not unforeseeable.
Sarah Hughes is a Solicitor in Anthony Gold's Family & Divorce Law department. For further information email Sarah or call 020 7940 4000.
