The Facts
Separated couple enters into binding child support agreement
The couple first started living together in 1994, were married in 1995 and had four children together.
They separated in 2006 and in February 2008, they entered parenting orders by consent, which provided that their youngest child would live with his mother and spend time with his father for five nights each fortnight during the school term and for half of the school holidays.
In July 2008, the parties entered into a binding child support agreement (BCSA) which provided that the father pay child support to the mother for the youngest child in the amount of $220 each week (indexed to inflation) until the child’s 18th birthday.
A BCSA is a binding agreement that can only be changed or set aside by a court if exceptional circumstances have arisen.
Dad stops paying child support after youngest child moves in with him
In April 2012, the youngest child, then aged 15 years and 4 months, started living with his father six nights each week and staying with the mother one night each week. This was mostly because the mother’s relationship with him had become strained. The father then stopped making child support payments to the mother.
At the end of September 2012, the mother relocated from regional NSW to Melbourne. At that time, the mother proposed that she return to regional NSW for two-week blocks and that during that time the son live with her. However, this never occurred.
Dad seeks to set aside binding child support agreement
On 6 March 2013, the father commenced proceedings seeking to set aside the BCSA. It was up to the court to determine whether the changes in the youngest child’s living arrangements since the BCSA was entered into amounted to exceptional circumstances.
Expert commentary on the court's decision
Court’s discretion to set aside a binding child support agreement
This case was first before the court after the father commenced proceedings seeking to set aside the BCSA. At trial, the judge commented to the mother: “the reason that a binding child support agreement was entered into for Mr Cheyne to pay you money was because you had the primary care of a child. You no longer have primary care of that child except, perhaps, for two per cent of a year.”
In May 2014, the BCSA was set aside. The mother appealed the decision to the Full Court of the Family Court. The mother’s appeal was allowed, which meant that the father had to pay the mother child support, even though she did not have care of their son. (See Masters & Cheyne [2016] FamCAFC 255.)
A court may set aside a binding child support agreement if it considers that exceptional circumstances exist relating to a parent or child which have arisen since the agreement was entered into and the applicant parent or the child will suffer hardship if the agreement is not set aside.
Dad fails to prove exceptional circumstances or hardship
The court considered that a change in the son’s living arrangements should have been reasonably foreseeable, especially when the BCSA was to last for many years, and therefore, that the son living with the father rather than the mother was not an exceptional circumstance.
As to the issue of hardship, the evidence showed that the father would have excess income after paying his expenses and after the weekly child support payment was made to the mother.
The mother’s submissions concerning the trial judge’s conduct were not accepted by the court.
Cessation of child support under Child Support Act
The legislative amendment to Section 12 of the Child Support Act relates to the cessation of child support. In this case, when the parties entered into the BCSA, Section 12 provided that a child support terminating event happens if the carer entitled to child support ceases to be an eligible carer.
The amended Section 12, which took effect in January 2009, provides that a child support terminating event happens if both of the parents are not eligible carers. Murphy and Aldridge JJ differed in their reasons concerning the application of this section.
Binding child support agreements can provide certainty but carry risks
Before parties enter into a binding child support agreement, they must each obtain independent legal advice as to the effect of the agreement on the rights of the party and the advantages and disadvantages of making the agreement at the time the advice was provided to the party.
In this case, at the time the BCSA was entered into, one such advantage for the father was certainty. The BCSA provided the father with certainty as to the amount of child support he was required to pay until the child’s 18th birthday. However, this advantage became a disadvantage after the child stopped living with the mother. This risk which the father took eventuated and the father was locked into paying child support to the mother.
Limited child support agreement more easily terminated and can be varied
An alternative to a binding child support agreement is a limited child support agreement, which may be entered into if an administrative assessment is in place. Once the limited child support agreement is entered into it must be registered. It will only be accepted for registration if the amount payable is not less than the assessed amount.
An advantage of a limited child support agreement is that it is more easily terminated and unlike a binding child support agreement, it may be varied. A limited child support agreement may be terminated if the assessed amount is varied by 15% or more. It may also be terminated at any time within three years after it was entered into.
Advantage of choosing flexible child support arrangements
In this case, the father’s obligation to pay child support to the mother notwithstanding care arrangements for the child, which had completely changed, arose from a binding child support agreement and not an administrative assessment by the Child Support Agency.
This case serves as a warning before entering into a binding child support agreement. At the time of making a binding child support agreement, the terms may be fair, but some future circumstance may mean that the agreement becomes unfair.
Consider other options which may provide flexibility for all parties as the child’s needs change.