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Does COVID-19 affect my Child Support Agreement?

Monday 12th April 2021

By: Rachel Peattie

As we know, binding child support agreements give parties the opportunity to enter into a written agreement about how they will each financially support their child/ren going forward.

The agreement can provide certainty to the receiving parent about the level of financial support for the child/ren that they will receive and the paying parent certainty as to their financial obligations going forward.


The Child Support (Assessment) Act 1989 (“the Act”) sets out certain criteria that must be met for the agreement to be binding including:

(a)           the agreement must be in writing,

(b)          the agreement must be signed by the parties to the agreement;  

(c)           the agreement must contain a statement confirming that the party to whom the statement relates has been provided, before the agreement was signed by them, with independent legal advice as to:

(i)            the effect of the agreement on the rights of that party; and

(ii)          the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement,

(d)          the certificate is to be signed by the person providing the independent legal advice; and

(e)           after the agreement is signed, the original or a copy is given to each party.

If the requirements of the Act are met, the agreement will be binding for the period set out in the agreement.


Parties can mutually agree to terminate an agreement early under section 80D of the Act but what action can a party take when they are no longer able to meet their financial obligations under the agreement and consent from the other party to terminate the agreement is not forthcoming?

Section 136(2)(d) of the Act provides that: 

If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:

(d)       in the case of a binding child support agreement—that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.


It is Parliaments intention to limit the circumstances in which binding child support agreements can be set aside.  Accordingly, the test is high and applications to set aside agreements should not be made lightly.  As set out in section 136, there are three limbs that the applicant must satisfy:

(a)           that there are “exceptional” circumstances relating to one of the children or parties to the agreement;

(b)          that those exceptional circumstances have arisen since the agreement was made; and

(c)           that the party or child will suffer hardship if the agreement is not set aside.



What are exceptional circumstances?

In Balzano & Balzano (2010) FLC 98-0488 Warnick J said:

“The term ‘exceptional circumstances’ has been considered in a number of cases, not necessarily in relation to its use in the Assessment Act. These include Sandrk and Sandrk (1992) FLC 92-260 where Gee J (at 78,750):

‘What amounts to exceptional circumstances is very much a question of fact and degree and the question in this case, as in that case, is whether what occurred subsequent to my orders of 22 May 1989 were such as to take it out of and beyond the ordinary circumstances in which such a change might be reasonably expected to occur.’

A feature in Simpson and Hamlin (supra) which Lambert J, saw as significant, and indeed as did the Full Court in agreeing with his Honour in this respect, was whether or not the change occurred unexpectedly and quickly after the making of the property order so that it could not have been regarded within the reasonable contemplate or expectation of the parties. It seems to me that this is the situation in this case.”

In Daley & Daley (2009) FLC 98-039, Brown FM said:

“Exceptional is defined by the New Shorter Oxford English Dictionary as follows:

Of the nature of or forming an exception; unusual, out of the ordinary, special; (of a person) unusually good, able, etc.

Accordingly, for circumstances to be exceptional, they must be unusual, out of the ordinary or special. In the child support context, in respect of an application for departure, Kay J held that ‘special circumstances’ were “facts peculiar to the particular case which set it apart from other cases.”


In Keane & Keane (2013) 50 Fam LR 120 Watts J held that having children during a second marriage, nor a workplace redundancy, was sufficient to satisfy the Court that an exceptional circumstance existed.


The recent case of Martyn & Martyn [2020] FamCA 526 considered whether a significant reduction in income arising from the Covid-19 pandemic was sufficient to satisfy that exceptional circumstances existed.


In Martyn & Martyn:

(a)           The parties had commenced cohabitation in 2005.

(b)          They had one child in 2008.  At the time of the hearing their daughter was 11 years old.

(c)           In July 2010 the father commenced employment at C Pty Ltd and was earning $140,000 per year after tax.  The father was also entitled to additional employment benefits such as bonuses and offers of shares in the company based on performance, as well as a car allowance of $25,000.

(d)          The parties decided to separate in around May 2012.

(e)           In August 2012 the parties entered into a binding child support agreement (“the Agreement”) which provided for the father to pay the mother the sum of $1,350 per month, such amount to increase by 2% per year at the commencement of the calendar year (commencing 1 January 2014).

(f)           In October 2012 the father commenced a relationship with his current wife (Ms D) and they moved in together in November 2012. Ms D had commenced working at C Pty Ltd in June 2011.

(g)          In November 2013 the father was dismissed from his position as a Senior Manager at C Pty Ltd. A formal hearing about the father’s dismissal was heard by the Fair Work Commission. A settlement is reached and the father relinquished his shares in C Pty Ltd. The mother asserted that the father also received a $60,000 payout. The payout is not disputed by the father who says the monies were put towards his living expenses during his period of unemployment; towards payments he was required to make under a binding financial agreement; and towards establishing his consulting company, G Pty Ltd.

(h)          Whilst the father’s proceedings are before the Fair Work Commission, Ms D’s employment is also terminated.  The Fair Work Commission also find Ms D’s dismissal unfair and she is awarded compensation.

(i)            In 2014 the parties were divorced.

(j)            In 2015 the father commenced working with F Pty Ltd. F Pty Ltd manufactures and supplies products to international businesses.

(k)          In June 2015 the father and Ms D purchased F Pty Ltd for $30,000. The liabilities of the business are also transferred to the father and Ms D.

(l)            In 2015 the father and Ms D were married.

(m)        In the 2015 financial year, the father does not receive a salary but receives a dividend payment of $80,000 from F Pty Ltd by way of pro-rata employer’s loan payments.

(n)          On 18 August 2016 the father instructed his solicitors to write to the mother and advise that he intended to reduce the child support he is required to pay under the Agreement.

(o)          On 1 September 2016 the father made the last payment in accordance with the Agreement, at that point in the sum of $1,433.

(p)          The mother then requested the Agency to collect payments on her behalf.  This commences from November 2016.

(q)          On 7 October 2016 the father filed an Initiating Application in the Federal Circuit Court seeking, amongst other orders that the Agreement be set aside under section 136 of the Act.

(r)            On 1 August 2017 Judge Henderson, as she was then, made an order staying the child support payment on the basis that the father pay the mother the sum of $580 per month.

(s)           In 2017 F Pty Ltd is affected by a significant flood causing property and equipment damage which amounts to a loss of about $600,000. The father acknowledged that the immediate loss is covered by insurance but says that the ensuing period of non-production resulted in a loss of customers. A letter from the companies’ financial advisors states that the business was “technically insolvent”.

(t)            The business starts to recover in 2019 but is then substantially impacted in 2020 by the impact of the Covid-19 pandemic on international business. The father told the mother of his financial difficulties in April 2020 and says that he cannot afford to continue to make the child support payments of $580 per month. The father instead offers to pay $120 per month. The mother declined the father’s offer.

(u)          The father subsequently files an Initiating Application seeking the Agreement be set aside under section 136 of the Act.

(v)          In his supporting Affidavit filed 29 May 2020 the father sets out that F Pty Ltd is a company which manufactures products, 90% for international business and 10% for local business. He says the impact of the Covid-19 pandemic was as follows:

“Since the outbreak of the Covid-19 virus we have effectively ceased all production for [international businesses] with all orders being cancelled from March 27th 2020. Total sales are reduced by around 90% and we [have products which are going out of date for international clients] unable to buy from us representing massive stock write-offs. We have stood down over 100 casual employees and all employees remaining are paid via the JobKeeper assistance, other than two overseas residents that are maintained on salary as we could not function without them; an accountant and a Technical Quality Assurance officer who are not eligible for JobKeeper or Jobseeker.”

(w)        The father’s goes on to say that whilst the business had received Federal Government assistance, unless the business continues to receive government assistance or new clients are engaged that the business will face the possibility of another insolvency event. 

(x)          The father also states that he has a tax debt owing to the ATO of just over $440,000.

(y)          In response the mother says that despite the financial difficulties faced by F Pty Ltd, the father and Ms D had continued to derive a substantial income from the business when drawings, remuneration and loans were considered. The mother’s Counsel acknowledges that the consequences of the Covid-19 pandemic do amount to exceptional circumstances but that the father’s business had suffered difficulties in the past and managed to remain solvent and the mother should not be “cut out of the Agreement” for a temporary hardship faced by the father.


During the proceedings, Counsel for the father submitted that if the Court was not minded to set aside the Agreement, that it should instead be suspended.  Counsel for the mother agreed. Both Counsel agreed that a power to suspend could be found in Venson & Venson (No 2) [2010] FamCA 963. In Venson & Venson (No 2) Austin J declined to set aside an agreement but found that a decrease in the profitability of the applicant’s company was sufficient to warrant the agreement being set aside for a period of time.  The agreement in that case was ultimately suspended for approximately three years.


In Martyn & Martyn his Honour considered whether the Agreement should be suspended rather than set aside. His Honour did not determine whether a power to suspend existed under Venson & Venson (No 2), instead assuming that it did. On the basis that he could not know the likely duration and impact of the pandemic on international commerce that the Agreement, his Honour found that it was more appropriate that the Agreement be set aside.

At paragraph 71 of his Judgment, his Honour found that had it not been for the covid-19 outbreak the Court would:

not have been satisfied, on the basis of the evidence presented, that the father’s business was in such dire financial circumstances that it established the existence of exceptional circumstances for the purpose of s 136(2)(d) of the CSA Act. However, the father was not challenged that, as a result of the Covid-19 pandemic, the business activity of F Pty Ltd has reduced by approximately 90%. It can reasonably be inferred that, consequently, the income derived by the father from the business will be significantly reduced below the amount which he received in the last financial year, being the sum of $41,460. It is clear that the reduction of the father’s income below that level will not enable him to pay child support in the sum of $1,550 per month as required by the Agreement. I am, therefore, satisfied that the outbreak of the COVID-19 pandemic is an exceptional circumstance and, further, I am satisfied that the father would suffer hardship if the Agreement is not set aside.”


Another issue in the case of Martyn & Martyn was the treatment of child support arrears.  As the child support payments under the Agreement had been stayed only, arrears owing to the mother had continued to mount since 2017.  As part of his application the father sought that the arrears be extinguished.


Counsel for the father submitted that the Court had power to extinguish the arrears under section 141(1)(h), (n) and (p) of the Act which states:

(1) In exercising its powers under this Act, a court may do all or any of the following:

(h)        make an order expressed to be retrospective to such day as the court considers appropriate;

(n)        make any other order (whether or not of the same kind as those referred to in paragraphs (a) to (m) (inclusive)) that the court considers appropriate;

(p)        make an order at any time.


In his Judgment, his Honour pointed to s 80CA(1) of the Act which states:

                   (1) A binding child support agreement must not be varied.


His Honour found that by extinguishing the arrears he would effectively be varying the Agreement to reduce the amount from $1,550.75 to $580 and he was precluded from doing so under s 80CA of the Act. His Honour also noted that this variation would also pre-date the time when the exceptional circumstance had arisen. His Honour ultimately declined to make an order extinguishing the father’s liability to pay the arrears. The arrears of $31,928.22 as at May 2020 therefore remained.


Even though the arrears were not extinguished, as the father does not have other property or financial resources in his name (other than his business) it is questionable whether the mother will have any chance recovering them in any event.


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