Settlement agreements

As the financial implications of Coronavirus are proving more and more precarious for individuals and businesses alike, Stephen Scown’s family team has received enquiries from people asking what this means for agreements reached in their divorce.

Such divorce settlement agreements might have been agreed many weeks ago – in some cases many months ago – at a time when the economy was arguably strong, job security was far better and there may have been no restrictions on travel or movement of goods.

The outbreak of the coronavirus pandemic threatens to leave many with such divorce settlement agreements in a precarious position. What can be done to remedy this?

How binding is the agreement?

The first step to consider is just how binding the current arrangement is. Is it an agreement that has been made with financial disclosure having been given and with legal advice having been taken? Is the agreement subject to any conditions or could it be said to be a concluded agreement? Is it documented in correspondence, in a separation agreement or in court approved consent order? Are there components to it which are by their very nature variable, such as maintenance?

All of these factors will weigh on the approach to be taken to the agreement and just how binding it is likely to be regarded.

The Barder principles

Even if all of these factors are directed against the person seeking to reopen the agreement that has been reached, there is scope to consider revisiting its terms through the Barder principles.

These Barder principles derive from a 1987 case and provide a potential avenue towards reopening an agreement if the event or events that have occurred since the agreement has been reached:

a. Invalidate the basis for the agreement;

b. Have happened within a relatively short period of time of the agreement;

c. Have been acted on promptly by the person seeking to reopen the agreement, and

d. Would not prejudice third parties if the outcome was changed. 

The court has also directed that the events should have been unforeseen and unforeseeable. 

The application of Barder to depreciations in asset value was looked at carefully following the financial crash of 2008. The cases of Myerson (where the husband’s share value sank from £2.99 to 27.5p) and Horne (where the crash meant the husband was no longer able to meet lump sum payments to the wife) both show how difficult it can be to succeed with a Barder argument in the wake of what is arguably an ordinary economic cycle. 

Is the coronavirus a Barder event?

The potential difference with COVID-19 is that such a vicious pandemic it is not part of any ordinary cycle, economic or otherwise. It was arguably neither foreseen nor foreseeable. This alone would suggest that the Coronavirus pandemic offers a potentially better “Barder gateway” than those 2008 cases.

The court has also shown a greater willingness to reopen agreements where ‘needs’ can no longer be met as a consequence of the unforeseen event, as opposed to agreements where there is still a surplus over needs. The immediate impact of COVID-19 would suggest that there may be many situations where the ability of a divorced spouse to meet their needs might now be called into question.

There are a great many variables that will determine the likelihood of succeeding with a Barder argument. There may be another less obvious route open to someone looking to revisit the terms of their agreement as a consequence of the coronavirus, or to those seeking to fend off the attempt of their spouse to reopen a divorce settlement.

Stephens Scown’s family team is able to advise on these principles and their application to your specific circumstances. We are able to offer telephone of video conferencing appointments at a time and convenience suitable to you.

We will be continuing to share updates as the situation around Coronavirus evolves. You can find the contingency plans that we have put in place, along with further advice, here.