29 May 2015

Lowering the bar in Barder?

Vanessa Mitchell (Duff)
Registered Foreign Lawyer | Hong Kong

In 1987 the House of Lords (as it was then) gave a unanimous and landmark decision in the case of Barder v Barder. To this day the case remains a leading authority on the circumstances in which a new and unexpected event can invalidate an existing Court order, and in which an appeal out of time can be granted. The circumstances of the case were tragic: five weeks after a consent order was made, providing for the husband to transfer to the wife the family home, the wife killed their two children and committed suicide. The order had been premised on the fundamental assumption that the wife and children needed a home for an indefinite period; such assumption being immediately invalidated upon her death. The husband sought to appeal out of time and for the order in respect of the transfer to be set aside. He was successful. The Barder Test The Court in Barder set out four conditions to be met in order for leave to apply out of time to be granted: – 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, so that, if leave to appeal out of time were to be given the appeal would be certain, or very likely, to succeed;That the new event should have occurred within a relatively short time of the order having been made;That the application for leave should be made reasonably promptly; andThat leave should not prejudice third parties who have acquired, in good faith and for valuable consideration, an interest in property which is the subject matter of the relevant order. The threshold test in Barder is high, and many attempts have been made over time to set aside orders, with little success, until now. It is always a fine line between finality in litigation as against the need to ensure that cases are decided on their true facts. Barder in Practice Judges hearing “Barder” cases have invariably concluded that what is alleged to be a “new event” or “unknown” was in fact foreseeable at the time the original order was made. In Judge v Judge [2008] a £14m notional debt subsequently being reduced to £600,000 was found to be a “known-unknown” where it had been anticipated that the debt could have been much higher or much lower. The sale of a business for £1.6m, when the husband had previously valued it at £129,000 in the case of Walkden v Walkden [2009] was also held not to fall within “Barder” since the wife had chosen to accept a fixed lump sum in lieu of a percentage share (with the result that the value of the company was in itself no longer a relevant factor). The widely reported cases of Horne v Horne and Myerson v Myerson in 2009 illustrate that significant decreases in wealth shortly after the making of an order (in both cases in respect of family businesses) as a result of the economic downturn were “foreseeable” and did not justify a set aside application; the “natural processes of price fluctuation” did not constitute a “Barder” event. In what circumstances can Barder then apply? Only on death? In 2011, the Court of Appeal held in Richardson v Richardson that death in itself would not suffice; the original order had to be based on the needs of the deceased, without there having been an element of compensation and sharing. If there is no longer a “need”, the fundamental assumption upon which the order was made falls away. Mr and Mrs Critchell On 2 April 2015 the Court of Appeal was asked once again to apply the principle in “Barder” to the case of Mr and Mrs Critchell. Although Lady Justice Black was eager to point out that 'it is rare for a case to come within the Barder principles', the four-point test had been met in the circumstances, and the lower Court had been right in overturning the original order and substituting its own. This case fell squarely into the category of “needs”; there was not enough money to go around and the parties, following an indication by the Judge at First Instance, did the best they could at the time. This resulted in an agreement that the family home (worth £175,000) be transferred to the wife (subject to a small mortgage of £10,000) on the basis that the husband would have a charge equal to 45% of the proceeds, which would bite on the earlier of the youngest child having completed secondary education, his wife's death or remarriage, or a sale of the property. The husband himself had purchased a home, but had borrowed £85,000 from his father to do so, and taken on a £63,000 mortgage. There was no other capital. It was accepted that the husband would eventually need his share of the equity in the home to repay his debts, but in the meantime, there was a greater need for housing the wife and children and the home had to be transferred to her. The wife was also awarded nominal maintenance. Within a month of the consent order, the husband's father died, leaving him with £180,000, and the extinction of his loan. The wife argued that the fundamental assumption upon which the order had been made was invalidated; the husband no longer had a “need” for the charge against the home as he could settle his debts now, and have a surplus. The Court agreed; the basis of the order was now wrong. Although it had been suggested that the husband had failed to disclose his inheritance prospects during the litigation, it was found that the death of his father was “completely unforeseen”; it was effectively a windfall. Had the potential inheritance been on the cards at the time the order was made, it would have been treated as a financial resource which the husband would likely have in the foreseeable future and it would have been a relevant factor at the time, no doubt resulting in a different outcome. Getting over the Barderline Although on the facts Mrs Critchell was over the “Barderline”, would the position have been the same had the inheritance fallen three, six or even twelve months later? Mr Critchell would not have needed his charge over the home then, any more than he needed it one month after the making of the order. Was it just good timing for Mrs Critchell that her father-in-law died so soon after the order was drawn? It was also clear in this case that the inheritance placed the husband in a stronger financial position than the wife, even without his charge, but would the Court have taken the same approach if there had not been a surplus from the inheritance, and taking away the charge would have left him as the financially weaker party overall? Timing was key, and it is clear from the “Barder” test that receipt of the inheritance some years down the line would not have resulted in the same outcome. The only option open to the wife then would have been to try to capitalise her maintenance; an uphill struggle in circumstances where the order made was nominal, unless she could demonstrate a change in her income needs to warrant an uplift, and a clean break. One must be alive to events happening shortly after the sealing of an order, although by its nature these have to be “unforseeable” to pass the threshold; it is not a case where one can anticipate running “Barder” as part of the litigation. It remains to be seen whether the bar has been lowered, and needless to say, every case will turn on its facts. There is certainly scope for practitioners to try to run “Barder”, albeit the judicial appetite in “big money” cases may not be there.

Vanessa Mitchell (Duff) Registered Foreign Lawyer | Hong Kong

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