13 November 2015

Barder Part II: the foreseeability of death


Vanessa Mitchell
Associate | UK

In my first Blog “Lowering the bar in Barder” I discussed the case of Mr Critchell, who having lost his father within a month of the drawing of the Court order, found the terms of his divorce settlement altered by the court so as to remove his charge against the family home on the basis that he no longer needed the money, now or in the future.

I explained within that Blog the circumstances in which one can consider applying for a variation of an order on Barder principles, and concluded by questioning whether there would be much judicial appetite for running such arguments in big money cases. I was wrong. On 11 June 2015, the High Court handed down its decision in the case of WA v Executors of the Estate of HA & Others. This was without doubt a very big money case.

WA v HA

In WA v HA, the court considered the wife's appeal against an order for financial provision made by Deputy District Judge McHardy, by consent, in November 2014. The award provided £17m to the husband. Although there had been a pre-nuptial agreement in the case, both parties accepted that it was not a relevant factor in the negotiations which led to the agreement being reached at the time. The sum was to be paid in two instalments of £8.67m, the first of which the wife paid within fourteen days of the order. The second was to follow.

Tragically, the husband committed suicide less than a month after the order was made. At some point between the order being made and the husband's death, and unbeknown to the wife, he had made a new will. He had also in the interim used some of his settlement to purchase a home for his elderly mother (who up until that time had been living in the grounds of the family estate). The will provided that the entirety of the husband's estate would be left to his three brothers, on the condition that they did not give any of the money to his former-wife. Surprisingly, no financial provision was made for the parties' three minor children.

The wife, who was described by the judge as being “fabulously wealthy”, sought for the entirety of the money to be repaid to her and for the order to be set aside. She argued that the proximity of the husband's death invalidated the consent order, as the order was based upon his future financial needs, which were no longer a necessary consideration. The husband's estate resisted the wife's application on the basis that the husband's death was foreseeable at the time of the original order.

The Court found that the tests in Barder had been met and reduced the total award to £5m. A repayment of £3.67 was payable to the wife from the husband's estate, and the second tranche was set aside.

In reaching its conclusion, the Court paused to consider the following: was the husband's death foreseen/foreseeable? If not, was his award a sharing award or a needs based award?

Foreseeability

It is fundamental that, in order to get a potential Barder case off the ground, “ a new event must have occurred since the making of the order which invalidates the basis, or fundamental assumption, upon which the order was made….”. This has been translated by case-law to mean that the event in question must be “unforeseen” and “unforeseeable” (i.e. more than a theoretical possibility) at the time the order was made.

On the facts of this case, the wife claimed that the husband's suicide was entirely unforeseen by her, because despite evidence of his state of mind showing that he might present a suicide risk during the proceedings, at the time the order was made 3 months later, the medical evidence was much more positive and found that he was no longer a danger to himself.

Objective or subjective test?

The Court agreed with the wife; it accepted that the wife did not foresee his suicide and also that it was unforeseeable; but unforeseeable by whom? What the Court did not clarify is the extent to which each limb (foresight and foreseeability) are objective or subjective tests. Almost certainly the event cannot have been foreseen by the spouse, but did it also have to be unforeseeable by her, or unforeseeable generally (i.e. by any reasonable bystander)? Given the decision in S v S (Ancillary Relief: Consent Order) [2002] in which the Court found (emphasis added) “it must still be unforeseeable in the sense that it was not envisaged and could not reasonably have been envisaged at the time…”. it must surely have to be objectively unforeseeable (i.e. by the Court).

It begs the question of what the Court would do if the event was unforeseen by, and unforeseeable to, the wife in question, but would have been foreseeable to any reasonable individual and the Court. Presumably the order would still stand, irrespective of what she had thought (or not thought). Perhaps that is less surprising in cases of court-imposed settlements, but ostensibly less fair to the innocent spouse who had not thought X could happen, whilst everyone else did. With increasing numbers of spouses representing themselves in financial remedy proceedings, there is potentially greater scope for unfairness when the financially weaker party, with perhaps less financial acumen and no solicitor, does a deal not really knowing what is or is not foreseeable with regard to her husband's company, assets or remuneration.

Needs and Sharing

The position is now definitive: an order can be overturned under Barder principles if it made provision for needs, but not if it was a “sharing” order.

The difficulty is how one unpicks what component of an order constitutes “needs” and what forms part of “sharing”, if any. If there is a consent order, as in this case, quite often the way in which the financial provision is structured is not articulated in correspondence or on the face of the order. Many judgments are obscure when it comes to explaining in any great detail how the Judge reached the figure he or she did.

Here it was held that the husband's claim was “primarily needs-based”. The Court noted, but seemingly did not give great weight to the fact, that there had been no exchange of budgets or property particulars. The real focus was on the fact that the majority of the assets in the case were gifted/inherited, and therefore the logical conclusion was that the award was primarily driven by needs. However, once the Court had determined that the order was based on needs, and hence could be challenged under Barder, as part of its assessment of what the revised sum should be, it dealt first with sharing!

Although there had been a pre-marital agreement excluding sharing, this did not prevent the Court from making an award for £5m, entirely based on the husband being able to “share” in the value of the family home/estate. When it came to the consideration of the husband's “needs”, the Court found that this would have included provision to house the husband's mother (although it is unclear whether the Court would have reached the same conclusion had the wife not willingly taken that responsibility on previously), as well as the husband's ability to enable him to make bequests. Although the £5m figure for sharing was seen as “exceeding his reasonable needs modestly”, the Court did not see that as a reason to reduce the award. It “simply seems right” as per Mr Justice Moor.

So where do we end up? We have a case where the settlement was overturned on the basis that it was calculated primarily by reference to needs, only to be replaced with an order primarily calculated by reference to sharing. One wonders whether the outcome would have been different had the husband (a) left his assets to his children (notwithstanding the fact that they were generously provided for by the wife); (b) not had an elderly mother who needed support; © not made it clear that he had a desire to make charitable bequests; and (d) had a less wealthy wife. Surely £5m is an extraordinary sum for one's needs, if their life expectancy is only 1 month, however generously assessed.

This case also brings interestingly to the fore the question of capital support for elderly parents and the ability to make charitable donations when assessing one's needs. Perhaps such provisions need to be included in budgets, in cases where there is plenty of money to go around.

Nasim v Nasim

Some two months later, on 5 August 2015, the High Court was faced with yet another application under the Barder principles, but founded on an entirely new and once could say “unforeseeable” use of the test.

The case of Mr and Mrs Nasim provides a particularly interesting application of the Barder principles. The High Court granted the husband permission to appeal an order made in November 2014. Following a fifteen-year marriage, divorce proceedings were issued in 2013, which were followed by financial remedy proceedings. The order in November 2014 awarded approximately 70% of the net proceeds of sale of the former matrimonial home (worth c. £290,000) to the wife. The Court's primary reason for the unequal division was the parties' intention that the two children of the marriage (aged 13 and 10 at the time) would spend 70% of their time staying with their mother rendering her housing needs greater than that of their father. The second factor was that the husband had secure employment and a greater mortgage borrowing capacity. Not an altogether surprising result, one would say, when the mother was the primary carer and it was a moderate assets case.

A mere matter of weeks after Deputy District Judge Butler gave his judgment, there was an “incident” (little is said about this in the judgment) between Mrs Nasim and their eldest daughter, following which Mrs Nasim was prosecuted. Thereafter, the children were no longer willing to see their mother, and moved in with their father.

The High Court reasoned that, were it not for the first instance Judge's understanding that the children would be spending less time staying with their father, he would have awarded the husband an equal share of the proceeds of the former matrimonial home, rather than a mere 30%. The change in residence was sufficient to invalidate the basis upon which the Judge had ordered an unequal division of the proceeds of sale. Seemingly this was unforeseen and unforeseeable. The fact that the wife had since undergone an Islamic ceremony of marriage with a man, and an English civil marriage with yet another man was completely irrelevant to the question of whether to allow the appeal and that in itself was not a Barder event. Whether it will be for the judge dealing with the matter under re-determination is another question.

Barder to the test

This case deploys quite an original use of the principle in Barder. Undoubtedly, few practitioners would advise clients to rely on Barder if a child was to leave home. Will it now be possible to rely on Barder if a child goes to boarding school (and is no longer primarily at home)? Possibly not if it was foreseeable and had previously been discussed between the parents. And what of the teenager who no longer gets on with mum and moves out; can dad recoup some of his capital?

It rather seems that the Barder principles are being tested more and more frequently in the Court room and new and ingenious ways of applying them are being deployed. Has the bar in Barder been lowered? Perhaps not, but we have learnt one lesson; the creativity of legal counsel cannot be underestimated!

Vanessa Mitchell Associate | London

Category: Blog