Can I set aside my binding child support agreement due to COVID-19?
In this article, Partner, Alison Ross and Law Graduate, John Hickey discuss the recent Court decision Martyn & Martyn  FamCA 526 and how the Court ordered that the agreement be set aside as the father would otherwise suffer exceptional financial hardship.
The parties entered into the agreement in 2012, which provided for the father to pay the mother the sum of $1,350 per month, to increase by two percent each year, in relation to their only child born in 2008.
In September 2016 the father ceased paying child support to the mother and commenced proceedings to set aside the agreement on the basis that, he asserted, his company was accruing significant debt and was “failing”. After using personal loans to keep the business afloat, the father relocated the business. Soon after relocation the business sustained property and equipment damage in the sum of $600,000.
Following this event, the Court ordered that enforcement of the agreement be stayed on the basis that the father would pay the mother $580 per month in child support until determination of the application. Although the father did continue to meet payments in that amount until the beginning of 2020, his child support liability, assessed in accordance with the agreement, continued to increase such that the arrears payable to the mother as at May 2020 were approximately $32,000.
The father sought that the agreement be set aside and that his outstanding arrears be extinguished, both of which were opposed by the mother.
While the father’s application was on foot, international commerce was abruptly terminated as a result of the COVID-19 pandemic. It was not challenged by the mother that, due to the pandemic, the total sales of the father’s business had reduced by approximately 90 percent, over 100 casual employees had been stood down and the remaining employees, including the father and his new wife, were placed on JobKeeper.
The father informed the Court that unless interstate and international borders reopened by September 2020, he would need to liquidate the business and declare bankruptcy. The father also submitted that unless the agreement was set aside, his debt and arrears would continue to increase in circumstances where he was unable to pay more than $120 per month for child support.
The mother argued that the father continued to derive substantial income from the business and that the effects of the COVID-19 pandemic would eventually pass. She further submitted that the father’s company had previously remained solvent through challenging periods and that she should not be ‘cut out’ of the agreement by virtue of the temporary hardship faced by the father and his business.
While the Court was not prepared to accept that the earlier events in relation to the husband’s business were “exceptional”, it agreed that the impact of the COVID-19 pandemic on the business was a circumstance justifying the setting aside of the agreement. The Court further accepted that:
The Court ultimately made an order to retrospectively terminate the agreement from the start of the COVID-19 pandemic. The Court, however, declined to make an order to set aside the father’s child support arrears payable to the mother prior to that date, as ‘exceptional circumstances’ had only commenced from the start of the COVID-19 pandemic and the Court considered that it would be contrary to section 136 of the Child Support (Assessment) Act 1989 (Cth) for the father’s arrears that had accrued prior to those exceptional circumstances to be extinguished.
The test of “exceptional circumstances”, before a binding child support agreement can be set aside. is a difficult test to meet. However, this case demonstrates that a significant decline in a parent’s finances as a result of the COVID-19 pandemic may constitute an exceptional circumstance, which causes them hardship sufficient to justify the setting aside of a binding child support agreement. As the pandemic continues both in Australia and around the world, further applications of this kind are likely to come before the Court.
If you have any queries in relation to the enforceability of your binding child support agreement, please do not hesitate to contact a member of our Family and Relationship Law team.