As the economic impact of COVID-19 continues, do you have cause to set aside a Binding Child Support Agreement entered into prior to the pandemic?
What is a Binding Child Support Agreement?
A Binding Child Support Agreement is a written agreement between parents or carers as to the payment of child support for a child. In order for an agreement to be binding, both parties must obtain independent legal advice prior to entering into an agreement.
Binding Child Support Agreements may only be set aside in limited circumstances. Section 136(2)(d) of the Child Support (Assessment) Act 1989 (Cth) sets out a three-limb test which must be satisfied in order to set aside a Binding Child Support agreement. The Court must be satisfied that:
- There are exceptional circumstances which relate to a party to the agreement or to a child of the agreement;
- The exceptional circumstances arose after the agreement was made; and
- The Applicant or the child will suffer hardship if the agreement is not set aside.
The recent case of Martyn & Martyn [2020] FamCA 526 considered a Father's application to set aside a Binding Child Support Agreement entered in 2012. The Father advanced his position that the COVID-19 pandemic created “exceptional circumstances” which would result in hardship, if the agreement was not set aside.
At the time of making the agreement in 2012, the Father was earning a salary of $140,000 per annum and the agreement provided for him to pay the Mother the sum of $1,350 per month. In 2015, the Father commenced a business which manufactured and supplied products to international businesses. In 2020, the business was directly impacted as a result of the abrupt closure of international commerce and borders. The Father submitted that the COVID-19 pandemic resulted in a 90% loss to his business. The Father contended that he would face hardship as a result of the exceptional circumstances, caused by the COVID-19 pandemic, as a consequence of his inability to continue the child support payments pursuant to the Agreement.
The Court found that the economic hardship amounted to “exceptional circumstances” and the Binding Child Support agreement was subsequently set aside. The case of Martyn suggests that parties to a Binding Child Support Agreement may have a cause of action to set aside the agreement if they have been impacted of an ‘exceptional’ nature to their financial position (in this case, a reduction of income of 90%). Whilst, the case of Martyn provides an example of how the extreme economic effects of the COVID-19 pandemic may constitute grounds for hardship, it is important to note that a mere reduction in income will not necessarily amount to grounds to set aside an agreement.
Coote Family Lawyers is recognised as one of the top family law firms in Melbourne. Contact us for advice on (03) 9804 0035.
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