COVID-19 Impacts on Binding Child Support Agreements
In a recent decision of the Family Court, a father succeeded in obtaining orders to set aside a Binding Child Support Agreement (BCSA) on the basis that his financial circumstances had been significantly impacted due to COVID-19. However, the father was unsuccessful in having his outstanding child support arrears extinguished.
By way of background, the parties had entered into the BCSA in 2012, which provided that the father pay the mother the sum of $1,350.00 per month with a yearly increase of 2%. At that time, the father was earning in excess of $140,000.00 per year. After losing his job, the father started a business in 2015. By 2016, the father’s business had financial difficulties and he applied to the Court (for the first time) seeking orders to set aside the BCSA. On that occasion, the judge did not set aside the BCSA, but ordered that it be stayed (put on hold), and that the father pay the mother a reduced amount of $580.00 a month until further order – should this word be notice instead of order? Yes I think so.
Although the father had continued to make the monthly payments of $580.00, he was accumulating arrears because the terms of the BCSA, whilst stayed, provided for $1,350.00 per month (to be indexed). By 2020, the father’s business – which involved international business - was significantly impacted by COVID-19, and he applied to the Court to have the BCSA set aside. He also sought orders that his arrears, which at that point were approximately $31,000, be extinguished.
Although BCSAs are intended to be final, a Court may, on application by a party, set aside a BCSA if satisfied that:
- there are exceptional circumstances which relate to a party to (of child of) the BCSA;
- those exceptional circumstances arise after the BCSA was made; and,
- the applicant or child will suffer hardship if the BCSA is not set aside.
In this case, the Court accepted that the father was genuinely under financial pressure due to the impact of COVID-19 on his business, and that he would suffer hardship if it was not set aside. However, the Court declined to make the orders to extinguish the arrears because those arrears arose before the impact of COVID.
If you have any questions in relation to a BCSA, please contact a member of Coleman Greig’s Family Law team today, who would be more than happy to assist you.