Is Inheritance over the Barderline?
In Over the Barderline and Still over the Barderline I consider the House of Lords case of Barder v Calouri [1988] AC 20, [1987] 2 All ER 440, still the leading authority on when a new event can invalidate a financial consent order upon divorce.
It is very difficult to establish a new event should invalidate a consent order. This was successfully argued in the Barder case. However the facts could not have been more extreme, with the wife killing herself and their two children five weeks after the consent order was made.
The principles in Barder have since been argued, for the most part unsuccessfully, following a number of new events including: –
• the death of one party
• an increase in asset value
• a decrease in asset value
• a reduced liability
• a new relationship
• a change of employment
• a change in the law
• and even bad legal advice
Of these, the Court has only been willing to recognise a Barder event either: –
a) where there has been a death of one party ;
b) where the increase or decrease in asset value is due to fraudulent behaviour or makes the order clearly unworkable; or
c) where one party has re-married;
and even then, it is still very rare that a Barder application will succeed.
However, the recent Court of Appeal case of Critchell v Critchell (2015) EWCA Civ 436 has arguably widened the scope to include an inheritance as a Barder event.
The husband and wife were in their mid-forties and had two children aged 12 and 14. The wife was living in the matrimonial home with the children. The husband had moved out and bought a property with a mortgage and funds borrowed from his father. The former matrimonial home was valued at £190,000 with a mortgage of £10,000. The husband’s property had little or no equity.
They reached an agreement at the FDR and the Consent Order provided for the wife to retain the matrimonial home and the husband to have a charge equivalent to 45% of the equity so he could repay his debt to his father.
The husband’s father then died one month after the Consent Order and the husband received an inheritance of £180,000. The wife appealed, arguing the husband’s inheritance invalidated the basis of the agreement.
The Court held that the husband’s inheritance satisfied the Barder criteria because: –
1. The inheritance arose after the Consent Order was made and invalidated the fundamental assumption that the husband needed a charge over the property. The husband no longer owed a debt to his father and had assets of £180,000.
2. The husband had become entitled to this inheritance only one month after the Consent Order.
3. The wife’s application was brought promptly.
4. The wife’s application did not prejudice any third parties.
The Court decided that the husband’s inheritance had resulted in a fundamental change in his needs. There had been very limited resources at the time of the Consent Order. This had changed. The wife still needed the former matrimonial home. However, the husband’s debt was now extinguished, and his inheritance left the parties in a fairly equal position in terms of net capital assets.
The need for a charge in the husband’s favour was removed, with the wife retaining the former matrimonial home outright. When making this decision the Court made the following comments: –
• The variation to the Consent Order would not put the wife in as strong a capital position as the husband. This was a windfall in the husband’s favour which he must benefit from.
• This was a case dictated by need and need is a relative concept affected by how much there is to go round.
• Where resources are limited the Court’s options may be circumscribed and leave one or both spouses in a testing situation.
• It was not the increase in the value of the assets which was the Barder event, but the fundamental change in the parties’ needs.
• It is rare for a case to come within the Barder principles and the Court’s decision was not intended to change this.
This is a rare example of the Court recognising a Barder event. Arguably it was not the inheritance that was the Barder event, and as the Court made clear it was not the increase in the value of the assets. It was perhaps the death of the husband’s father and the consequential extinguishing of the husband’s debt that was the Barder event. This shows again that death is one of the few examples of where a Barder application can succeed. However, anyone considering issuing a Barder application should still proceed with great caution.