COVID-19 has caused me financial difficulties. Can I set aside my Binding Child Support Agreement?

The COVID-19 pandemic has been labelled as many things by many people, but can be it described as an ‘exceptional circumstance’ required to set aside your Binding Child Support Agreement?

The recent Family Court case of Martyn[1] found that yes, the COVID-19 pandemic is an “exceptional circumstance”.  However, an ‘exceptional circumstance’ alone is not enough to set aside your Binding Child Support Agreement.

This is remains relevant as the COVID-19 pandemic continues and as the Commonwealth Government’s JobKeeper payments have subsided. It is likely that a lot of businesses and their employees will suffer financially.

How do you set aside a Binding Child Support Agreement?

To set aside your Binding Child Support Agreement, you must satisfying the following three-limb test:[2]

  1. That there are exceptional circumstances which relate to a party to the agreement or to a child of the agreement;
  2. That the exceptional circumstances arose after the agreement was made; and
  3. That you or the child will suffer hardship if the agreement is not set aside

What happened in Martyn & Martyn?

In this case, the father brought an application to set aside his Binding Child Support Agreement (‘the Agreement’).

The parties had entered into the Agreement in 2012, which provided for the father to pay the mother $1,350 per month and this payment was agreed to increase by 2% each year.

The father owned and operated a manufacturing business with his new wife.

In 2016, the father initiated proceedings in the Federal Circuit Court to set aside the Agreement for the reason that his business was failing and incurring significant debt.

In 2017, the court ordered that on an interim basis, the Agreement be stayed (essentially suspending the Agreement) on the basis that the father pay the mother, by way of child support, $580 per month or as assessed by the Child Support Agency. The matter was then transferred to the Family Court.

By 2019, the father’s company began to financially recover as a result of tax incentives from the Australian Taxation Office.

However, by 2020, the father’s business was again facing serious financial losses as a result of the COVID-19 outbreak. The father’s business produced 90% of its manufactured products for international businesses, whilst the remaining 10% was for local businesses. As a result of the effect of the COVID-19 pandemic on international commerce, the father’s business was significantly impacted, such that business activity reduced by 90%. Although the father began to receive assistance from the JobKeeper payment scheme, the father contended that his business was facing insolvency by September 2020.

The Family Court found that in this matter, the COVID-19 pandemic amounted to an “exceptional circumstance” and that the father would suffer hardship if the Agreement was not set aside.

The Court chose to set aside the Agreement rather than suspend, as there was no evidence to indicate the likely duration and impact of COVID-19 on international commerce.

What does COVID-19 as an ‘exceptional circumstance’ mean going forward?

The Court has now established that COVID-19 can be an ‘exceptional circumstance’ where the pandemic has had a significant impact on a person’s financial circumstances.

This does not necessarily mean that any negative financial impact as a result of the COVID-19 pandemic on one party’s financial circumstances will be considered an ‘exceptional circumstance’.

The ‘exceptional circumstance’ in Martyn was that the COVID-19 pandemic resulted in a significant reduction of 90% of his business activity, which led to financial hardship.

It is unlikely that merely experiencing financial difficulty, unless it leads to financial hardship, as a result of the COVID-19 pandemic will be sufficient to set aside your Binding Child Support Agreement.

If you need advice in relation to your Binding Child Support Agreement or enforcement of a Binding Child Support Agreement, please contact Rowan Skinner & Associates Lawyers to arrange a complimentary 15-minute consultation.

References

[1] Martyn & Martyn [2020] FamCA 526

[2] Child Support (Assessment) Act 1989 (Cth) s 136