When is a child support agreement binding?

Binding Child Support Agreements are becoming a more popular option as separating parents seek to make arrangements for the financial support of their children outside of any assessment from the Child Support Agency (CSA).

The idea of these agreements is to stop any interference by the CSA once they are signed, other than on rare occasions when the collection of money needs enforcement. There are great benefits to these agreements when there are no significant changes to care arrangements, but what happens if there are significant changes after the agreement is signed, which would make it unfair to continue?

Binding Child Support Agreements are by definition binding and having them ‘set aside’ or changed is extremely difficult unless you can satisfy a very narrow definition of a terminating event under the Child Support Assessment Act (the legislation), or the agreement was entered into by fraud or duress.

The recent case of Cheyne & Masters & Anor (SSAT Appeal) [2014] FCCA 856 (19 May 2014) considered an application to set aside a Binding Child Support Agreement.

In that case, the parents had signed the agreement in 2008, which caused the father to pay child support to the mother as their child was living with the mother for 64 per cent of the time. By 2012, the child was only living with the mother for 16 per cent of the time and by 2013, the child lived with the mother only 2 per cent of the time, as she moved interstate, leaving the child in the care of the father.

Under the agreement, the father was still liable to pay the mother almost $240 every week in child support for a child who was now predominately cared for by him. Quite incredibly, the mother insisted upon the collection of these monies from the father, even after the CSA determined that she now needed to pay child support to the father.

Initially, the CSA advised that the father did not need to continue to pay child support as the mother ceased to be an eligible parent in terms of the legislation due to the change in care arrangements. When the father ceased paying, the mother appealed to the Social Security Appeals Tribunal.
The Tribunal ruled that the CSA decision for the mother to commence paying child support to the father was outside of its power and held that the initial agreement was still in force. It was then necessary for the father to appeal that Tribunal decision in the Federal Circuit Court of Australia.

Common sense prevailed, with the Judge finding that the father would suffer hardship if the Court’s discretion was not exercised to set aside the Binding Child Support Agreement.

A further complication was that after their agreement was signed, section 12 of the legislation was amended. It had contained a provision that one parent ceasing to be an eligible carer was a child support terminating event. That would have been the end of the matter but for the amendment.

The Tribunal had found that the amendment operated retrospectively as item 29 of the amending legislation provided that the amendments applied in relation to child support terminating events which happened on or after the amendments.

Judge Terry stated: “The final relevant matter to note is that the 2006 amendments which created binding child support agreements made it deliberately difficult for a party to escape from such an agreement because of a change of circumstances.”

In respect to the father’s application to have the agreement set aside, he relied on section 136(2)(d) of the legislation, which requires the court to consider:

• i. Whether circumstances of an exceptional nature have arisen relating to a party to the agreement or a child in respect of whom the agreement is made;
• ii. Whether as a result the applicant or child will suffer hardship if the agreement is not set aside;
• iii. If so, whether in the exercise of its discretion the court should set the agreement aside.

In essence, common sense prevailed in this case and Judge Terry found that the mother’s move interstate did constitute exceptional circumstances for the purpose of section 136(2)(d) of the legislation and also that the father would suffer hardship if the Court’s discretion was not exercised to set aside the agreement.

The Judge commented that: “The effect of the change which occurred in this case has to be considered in the context of the child support legislation and it was so dramatic that unless the agreement is set aside, the financial arrangements will be completely out of kilter with the objects and principles of the Assessment Act.

Streeterlaw Accredited Specialist in Family Law Simone Green said the case highlights one of the potential dangers of entering into a Binding Child Support Agreement.

“It is not always possible at the time of signing an agreement to foresee what could amount to an exceptional change in circumstances,” Ms Green said.
“It is essential to obtain competent, specialist legal advice in respect to these agreements.”

For further information or advice, please contact the Family Law experts at Streeterlaw on 8197 0105 or email advice@streeterlaw.com.au.