How Can a Binding Child Support Agreement Be Altered? Has COVID-19 Changed Things?

Binding child support agreements are written arrangements between parents or carers about child support payments. They can only be made if the parties have received independent legal advice. Once agreed, they are not lightly altered or set aside. However, COVID-19 has had far-reaching impacts on many aspects of life. A recent case, involving an application to set aside a binding child support agreement, illustrates the potential impact of the current pandemic on such agreements.

Setting aside a binding child support agreement

Once executed, there are limited circumstances within which a binding child support agreement will be set aside by the Court. The Court must be satisfied that:

• There are exceptional circumstances,
• These circumstances arose after the agreement was made; and
• That a party to the agreement, or a relevant child, would suffer hardship if it was not set aside.

Exceptional circumstances are to be given their ordinary definition, being circumstances that are extraordinary, unusual or out of the ordinary. The meaning of hardship, based on previous case law, takes into account the difficulties of the circumstances, serious suffering or deprivation, or a condition resulting in severe toil, trial, oppression or need.

In the illustrated case, the Court had to consider the meaning of “exceptional circumstances” and “hardship” to make a determination.

Case example

In Martyn & Martyn (2020) FamCA 256, the issues for the Court to determine were whether the child support arrangement should set aside or suspended and also whether it should extinguish the accrued arrears of child support payments.

Facts of the case

Following their separation, Mr Martyn had entered into a binding child support agreement with Mrs Martyn in 2012. He agreed to pay $1350 per month, rising by 2% per annum in respect of their only child, born in 2008.

In 2013 Mr Martyn became unemployed. He set up a business manufacturing products catering to overseas businesses. In late 2016 he commenced proceedings in the Federal Circuit Court of Australia to set aside the binding agreement on the basis of financial difficulties being experienced by his business and he could no longer afford the payments. The company had incurred significant debts, and trading was fragile.

Mrs Martyn opposed the application, but the Court made an interim order to reduce the payments to $580 per month until a further determination of the application. The father continued to make the reduced payments, but in January 2020 he issued proceedings in the Family Court seeking to both set aside the child support agreement and also extinguish the outstanding support payment arrears which by May 2020 amounted to $32000. 

What arguments were put forward by the parties?

The case came before the Family Court of Australia in June 2020. By this time, Mr Martyn’s business was suffering heavily because of the reaction to the pandemic with cross-border restrictions and other measures; business activity fell by 90%. The father’s lawyers argued that Mr Martyn’s financial circumstances had changed significantly because of limitations on international commerce. As a result, Mr Martyn could not afford more than $120 per month by way of child support and needed the arrears of $32000 to be discharged.

The mother conceded that the depth of the financial crisis of the business was primarily as a result of the pandemic. However, she argued that the binding arrangement should not be set aside because of the temporary hardship faced by the father.

What did the Court decide?

Child support agreement

The Court agreed to set aside the child support agreement, rather than suspend it. The Judge determined as follows:

I decline to exercise discretion to suspend rather than set aside the Agreement because there is an understandable absence of evidence as to the likely duration and the impact of the COVID-19 pandemic on international commerce. In other words, it is not possible to determine, on the basis of the evidence before the Court, whether it is likely that the father’s business would recover to the extent that he is capable of satisfying the obligation imposed on him pursuant to the Agreement after any period of suspension.

The arrears

As regards the arrears, the Court did not agree to discharge these amounts. Having found that the exceptional circumstances were the result of COVID-19, the Court declined that part of the application given most of the arrears pre-dated the pandemic’s disruptive effects.

What does the case mean for child support agreements?

The Court reiterated that binding child support agreements would not be set aside lightly. Importantly, the Court considered and recognised that the full economic impact of the pandemic on the world’s markets was not yet known and that Mr Martyn’s business may never recover.

The required exceptional circumstances test can be a difficult one to meet. Still, this case demonstrates that a significant decline in a financial position, as a result of a pandemic, may constitute circumstances which can lead to financial hardship sufficient enough to justify setting aside a binding child support agreement.

How did COVID-19 impact decision making of the Court?

The Court advised that, if it had not been for the emergence of COVID-19, it would not have been satisfied by Mr Martyn’s evidence that exceptional circumstances applied. However, the outbreak of the virus was an exceptional circumstance. The consequent travel and trade restrictions had impacted the business in such a way that hardship would be suffered if the agreement was not set aside.

However, Mr Martyn was not excused from meeting the arrears of the child support payments as much of these arrears were accrued before the outbreak of COVID-19.

The loss of, or reduction in income, due to COVID-19 and whether it constitutes exceptional circumstances will depend on the facts and circumstances of each case.

It seems unlikely that this case will be the last application that comes before the Court relating to issues to do with property matters consequent upon these exceptional times.

Contact our Child Support Lawyers in Sydney, New South Wales

The specialist family lawyers at Szabo & Associates Solicitors have extensive experience in advising clients with child support matters or indeed, any other aspect of family law. Please contact us on 02 9281 5088, or fill in our online contact form.