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Impact of COVID-19 on Binding Child Support Agreement

In the recent case of Martyn and Martyn [2020] FAMCA 526 (1 July 2020) the Family Court was asked to determine whether a Binding Child Support Agreement entered into between separated parents should be set aside on the basis of the impact of COVID 19. 

In this case Mr Martyn entered into a Binding Child Support Agreement with Mrs Martyn in 2012 after their separation.  At that time Mr Martyn was employed as a senior manager earning around $140,000 after tax each year plus bonuses, share incentives and a car allowance.  Mr and Mrs Martyn agreed that the Child Support that Mr Martyn would pay would be $1,350 each month, increasing by 2% each year from 1 January 2014. 

In late 2013 Mr Martyn lost his job and established a new business with his new partner manufacturing products for overseas businesses.  By late 2016 Mr Martyn had commenced proceedings before the Federal Circuit Court of Australia seeking to set aside the Binding Child Support Agreement on the basis that he could no longer afford to pay the amount agreed in 2012.

The application was opposed by Mrs Martyn who argued that the business runs by Mr Martyn and his new partner still had a turnover of about $6 million per year and they appeared to have the capacity to live a comfortable life, having overseas holidays, pay private school fees as well as making payments of Child Support.  However, upon the case coming before the Court Mr Martyn’s child support was reduced on an interim basis to $580 per month plus payment of half of the education, medical and other expenses for their children.

The case between Mr and Mrs Martyn continued and was not heard before the Court until early June 2020.  By that time Mr Martyn’s business had gone through a number of issues and owed very high tax debts.

The Court was required to consider whether the Binding Child Support Agreement should be set aside based on the relevant law which states that the person seeking to set aside a Binding Agreement must satisfy the Court that:

  1. There are exceptional circumstances which relate to a party to the Agreement or a child in respect of whom the agreement was made.
  2. That those exceptional circumstances arose after the Agreement was made; and
  3. That the applicant or the child will suffer hardship if the Agreement is not set aside.

Exceptional circumstances are to be given their ordinary meaning, being circumstances that are extraordinary, unusual or out of the ordinary.  The meaning of hardship as considered in earlier cases decided by the Family Court takes into account hardness of fate or circumstances; severe suffering or privation; or a condition that there is hardship upon a person resulting in severe toil, trial, oppression or need.  The Court confirmed that it is not intended that Binding Agreements should be set aside lightly. 

Ultimately the Family Court held that if it had not been for the outbreak of the COVID 19 pandemic the Court would not have been satisfied, on the basis of the evidence presented by Mr Martyn, that his business was in such dire financial circumstances that it established the existence of exceptional circumstances for the purposes of the Child Support Assessment Act.  The Court was satisfied in this case that the outbreak of COVID 19 was such an exceptional circumstance as the travel and trade restrictions impacted and Mr Martyn’s business, that he would suffer hardship if the Agreement was not set aside.

The husband was not excused however from the payment of more than $30,000 of arrears of Child Support, as the Court accepted that much of the arrears had accrued prior to the outbreak of COVID 19.

While it is clear from this case, and other recent cases that have examined the issue of the impact of COVID 19 in family law matters, you cannot automatically assume that the pandemic will be enough to establish an exceptional circumstance that will allow your Binding Child Support or Financial Agreement to be set aside. 

If you would like to discuss how COVID 19 may impact on your family law matters, please contact our office on Ph: (02) 4928 7300.

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