Delany and Delany
[2009] FMCAfam 438
•8 May 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DELANY & DELANY | [2009] FMCAfam 438 |
| CHILD SUPPORT – Application for stay in collection of child support assessed pursuant to child support agreement – substantive application seeks to set aside child support agreement on the basis of exceptional circumstances – child support agreement made on 29 October 2007 – pursuant to transitional provisions agreement taken to be a binding agreement – matters to be taken into account in determining whether to grant a stay in collection pursuant to section 111(c) of Child Support (Registration & Collection) Act. |
| Family Law Act 1975 (Cth), ss.90G Child Support (Assessment) Act 1989, ss.4, 80C, 80D, 80E, 80G, 92, 136(2), 146B Child Support (Registration & Collection) Act 1988, ss.111A, 111B, 111C |
| Applicant: | MR DELANY |
| Respondent: | MS DELANY |
| File Number: | ADC 467 of 2009 |
| Judgment of: | Brown FM |
| Hearing date: | 28 April 2009 |
| Date of Last Submission: | 28 April 2009 |
| Delivered at: | Adelaide |
| Delivered on: | 8 May 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Stephen |
| Solicitors for the Applicant: | Southern Community Justice Centre |
| Counsel for the Respondent: | Mr McKenzie |
| Solicitors for the Respondent: | Legal Services Commission |
ORDERS
The matter is fixed for final hearing before Federal Magistrate Brown on 13 July 2009 at 10:00am NOTING 1 day allowed.
The applicant pay the hearing fee or obtain a Remission Certificate in respect thereof within 28 days of the date hereof.
Each party file and serve any further affidavit of evidence for trial 28 days prior to the date fixed for final hearing.
UNTIL FURTHER OR OTHER ORDER
The operation of the child support agreement made between the parties on 29 October 2007 and registered with the Child Support Agency for collection be stayed and an injunction issue and the Registrar of the Child Support Agency be restrained from collecting all arrears and late payment fees of child support pursuant to the aforesaid agreement which has been registered with the Agency for collection.
The father apply to the Registrar of the Child Support Agency for a provisional assessment of child support pursuant to section 146B of the Child Support (Assessment) Act 1989 within seven (7) days of these orders.
The father pay the mother child support in respect of the children [X] born in 2001 and [Y] born in 2006 to be calculated in accordance with the notional assessment of child support referred to in order (5) hereof from 1 March 2009 onwards together with one half of the child [X]’s school fees to attend [S] School from term one 2009 onwards.
IT IS NOTED that publication of this judgment under the pseudonym Delany & Delany is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADC 467 of 2009
| MR DELANY |
Applicant
And
| MS DELANY |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings concern an application brought by Mr Delany “the husband” for a stay in collection by the Child Support Agency of child support owed by him to Ms Delany “the wife”.
The parties are the parents of two children [X] born in 2001 and [Y] born in 2006. The husband’s liability arises as a results of a child support agreement entered into between the parties on 29 October 2007, which has been lodged with the Agency for collection of the child support which arises from its operation.
The agreement provides that the husband would pay the wife the sum of $150.00 per week for each of [X] and [Y], a total amount of child support of $300.00 per week. The agreement in question has no concluding date and provides no mechanisms for its termination or variation.
It is the husband’s position that his financial circumstances, particularly his level of remuneration, have changed since October of 2007 and he can no longer afford to pay the child support amount specified by the agreement without suffering hardship.
In support of his position, the husband points to the fact that, if the legislatively mandated child support formula was applied to his and the wife’s current financial circumstances and the prevailing care arrangements for the children, it would result in an assessment of child support in a significantly lower figure per week than that provided by the agreement.
In the longer term, the husband is applying to set aside the child support agreement in question pursuant to the provisions of section 136(2) of the Child Support (Assessment) Act 1989. That application is opposed by the wife, who argues that the husband is bound by the agreement in question and has failed to demonstrate sufficiently exceptional circumstances to justify the setting aside of the agreement.
Whether the agreement should be set aside is an issue for another day, when each of the parties will be able to provide evidence of the circumstances surrounding the making of the child support agreement in question and their relevant financial circumstances.
The husband has fallen into arrears of child support as a result of his failure to comply with the terms of the agreement of 29 October 2007. As a consequence, he has been advised by officers of the Child Support Agency that the Agency intends to take enforcement proceedings against him shortly. From his perspective, this situation has created a situation of great urgency.
Pending the outcome of his application to set aside the child support agreement in question, he wishes to stay the collection of child support by the Agency and in lieu of the amount of child support provided by the agreement pay to the wife the sum of $110.00 per week in total as child support for both [X] and [Y]. It is his position that this is a more appropriate payment of child support, given his current financial circumstances.
The wife resists this interim application. She seeks the dismissal of the husband’s application for a stay and in lieu thereof seeks an order that he pay her costs of these proceedings. It is her case that any stay of the agreement would result in financial hardship to her, particularly in respect of issues to do with the payment of [X]’s private school fees. It is her case that the agreement in question took into account these expenses and it would be prejudicial to her if there is a stay in collection of child support, whilst the obligation for payment of these fees remains with her.
The court has broad powers in exercising its jurisdiction under the Child Support (Assessment) Act 1989 and the Child Support (Registration & Collection) Act 1988.[1] In particular, if proceedings have been instituted in the court pursuant to the Child Support (Assessment) Act, the court may make an order staying the operation or implementation of both the Assessment Act and the Registration and Collection Act.
[1] See section 111A of the Child Support (Registration & Collection) Act 1988
In particular, pursuant to section 111C(3) of the Registration & Collection) Act the court may:
“Pending the hearing and final determination of the proceeding, the court may make such orders as the court considers appropriate staying or otherwise affecting the operation or implementation of the Assessment Act and this Act if the court considers that it is desirable to do so, taking into account the interests of persons who may be affected by the outcome of the proceedings.”
The husband’s interim application is based on this section. It is his position that his interests will be adversely affected if the stay in question is not granted and it is appropriate that the stay he seeks should be granted.
On the other hand, it is the wife’s position that she and the children concerned will be subjected to financial hardship and detrimentally affected if the stay in question is granted. In particular, it is her case that she has arranged her affairs on the basis that she will be receiving a total amount of child support of $300.00 per week. She denies the husband’s assertion that he is unable to meet this obligation, which on her case he freely and knowingly accepted.
The evidence
In his case, the husband relies on the following documents:
i)His application filed on 9 February 2009;
ii)Two affidavits of himself filed on 9 February 2009 and 24 April 2009 respectively;
iii)A statement of his financial circumstances filed on 24 April 2009. and
iv)His reply filed 24 April 2009.
The wife relies on the following documents:
i)Her response filed on 16 April 2009;
ii)An affidavit of herself filed on 16 April 2009; and
iii)A statement of her financial circumstances filed on 16 April 2009.
Necessarily the hearing of the parties’ competing applications in respect of the stay was brief. There was no opportunity for any cross examination of either party. As a consequence, where there is a dispute between the parties regarding a factual matter, I am unable to resolve that dispute in the context of these proceedings. The adjudication of such factual issues must await the final hearing of the matter.
a) The husband’s case and financial circumstances
The husband is employed [in the hospitality industry]. He has deposed that he earns $865.38 gross per week or almost exactly $45,000.00 per annum. In an earlier statement of his financial affairs[2] he deposed receiving a gross weekly income of $961.50 or almost $50,000.00 per annum. The wife is suspicious about this change of employment.
[2] filed on 9 February 2009
It is also the husband’s case that his average personal expenditure routinely exceeds his income. His major expenses each week are: tax ($154.00); rent ($250.00); food ($90.00); and car running expenses ($55.00).
It is common ground between the parties that [X] and [Y] live predominantly with their mother but spend time with their father on one night per week, so far as [Y] is concerned and two nights per week, so far as [X] is concerned.
As at 22 April 2009, the husband is in arrears of child support, pursuant to the agreement in question, in the sum of $3,514.19 with an additional late penalty payment of $106.78. It is the husband’s position that he is unable to meet those arrears, which will continue to accrue if the stay is not granted.
The husband concedes his taxable income in the year ending 30 June 2008 was $58,372.00. Considerable controversy exists between the parties as to why the husband has changed his employment in the intervening period and whether it is reasonable for him to be working in a less well paid position now.
It is the husband’s position that the changes in his employment were unavoidable. The mother is suspicious about the changes and fears some ulterior motive on the husband’s part. She is concerned at the continual decline in the husband’s income in recent times. The agreement in question makes no provision for the husband’s unemployment or any other modification of the amount to be paid due to unforseen exigencies.
The parties separated on 16 October 2007. Accordingly, the child support agreement between them was executed in the early period of their separation. They are not as yet divorced. In addition, issues regarding the division of property, particularly what should occur in respect of the parties’ former family home, which the wife continues to occupy, remain unresolved.
It is the husband’s case that the wife retained the majority of the parties’ furniture and household effects. As a consequence, he was put to significant expense to re-establish himself, particularly in respect of renting alternative accommodation for himself. It is his position that he has been forced to borrow a sum in excess of $6,000.00 from his parents to provide for himself.
The husband denies any suggestion that he is living an extravagant lifestyle. In support of his position, he points to the fact that he is driving a car which is more than ten years old. It is also his position that he has paid a significant number of jointly incurred marital debts, in the period following the parties’ separation.
b) The wife’s financial circumstances
At the time the parties’ separated, the wife was not in the paid workforce. She has however recently completed a course in [health care]. As a result, she is now in part-time employment as a [omitted].
The wife’s weekly gross income is $390.00, which equates to an annual salary of $20,280.00. In addition, the wife receives a number of government benefits. She is critical of the husband for not being reliable in his current obligation to her to pay child support.
In these circumstances, it is the wife’s position that her unavoidable level of personal expenditure greatly exceeds her income. Her major expenses are food ($200.00); education expenses ($150.00); car running expenses ($100.00); tax ($50.00); mortgage repayments ($247.00); and utilities ($89.00).
In total, the wife estimates her recurrent expenses for her and the children’s support as being $762.00 per week, which when added to her other recurrent expenses for mortgage repayments; credit card debts; and health and other forms of insurance; bring her total weekly expenses to around $1,100.00.
It is the wife’s position that she has no assets of any significant value, particularly in the form of her savings, which are limited. Her major asset is her interest in the former matrimonial home and a motor vehicle and household contents of modest value.
It is the wife’s position that it is axiomatic, from any proper consideration of her financial circumstances, that she is struggling to make ends meet, particularly whilst [X] and [Y] live predominantly with her.
[X] is currently attending [S] School. [Y] is at [M] school. Mr Delany has provided documentation, which indicates [X]’s school fees are $3,120.00 per annum. Ms Delany asserts the fees for the children, in total, are significantly higher being around $5,000.00.[3] Her statement of financial circumstances gives a higher figure again, of around $7,800.00.
[3] See wife’s affidavit filed 16 April 2009 at paragraph 5
Given her age, the husband does not think school fees for [Y] should be a pressing concern. He complains that he was not consulted about the decision to send [Y] to [M] School. From the wife’s perspective, the school fees were an essential component of the child support agreement, which were reflected in the total sum upon which she and the husband agreed.
c) The circumstances of the making of the child support agreement
It is common ground between the parties that they made their agreement prior to the commencement of operation of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006. This legislation reformed the law relating to child support in a number of significant ways, including in respect of the making and discharge of child support agreements.
The child support agreement in question was completed by the parties on a proforma document, which is readily available to separated parents, through the Child Support Agency. It provides a number of warnings about the binding nature of the agreement. Recommendations are also made, in print, on the document, that any parties proposing using the form in question should seek legal advice in the event of uncertainty.
It is common ground between the parties that neither party was provided with specific legal advice regarding the child support agreement, particularly how it could be amended. Certainly, neither of them was provided with advice regarding the implications of the legislative amendments, which came into force after 1 July 2008.
The husband was born in France. His mother tongue is French. He has lived in Australia since 1996. It is his case that although his English language skills have improved in the period since, his English remains limited, particularly in the area of technical language.
In particular, the husband contends that he did not fully understand the potentially binding nature of the document, which he signed on 29 October 2007. It is his position that he thought the term “agreement” was not analogous to a “contract”, which he realised was something of a more binding nature. This potential misapprehension flows from the meaning of the term “agreement” in French.
The husband also points to the fact that the agreement was executed very shortly after the parties separated. In the period since, his income has reduced and the care arrangements for the two children have changed. Initially, neither child was spending any overnight time with him. Given these changes in his circumstances, he contends that the current agreement creates a grave level of financial hardship for him and, in essence, it is impossible for him to comply with its terms.
The wife does not agree. It is her position that the husband is proficient in English and fully comprehended the nature of the document which he was signing. It is her view that the arrangement reached was advantageous to the husband and was negotiated on the basis that the children would have significant private education expenses to which both parties would have to contribute.
As previously indicated, the wife is suspicious of how the husband has behaved in respect of his employment in the period since the parties’ separated. It is her case that the husband was anxious to enter the agreement, which capped his child support liability permanently, because he believed that it was likely that he would increase rather than decrease his level of remuneration in future.
In addition, she is aggrieved at the potential for her and the children to suffer hardship, particularly in regards to the imposition of payment for school fees, if the husband is allowed to renege on his commitment to pay child support.
The wife is critical of the husband for not heeding the warnings on the child support agreement in question. In addition, it is her evidence that the Child Support Agency undertook an extensive advertising campaign regarding the legislative amendments in question and, in all these circumstances, it was incumbent upon the husband to educate himself about the implications of the agreement which he executed. Essentially, it is the wife’s position that she should not be prejudiced if the husband has failed to safeguard his interests.
At this juncture, in the context of the interim hearing, I am not in a position to resolve many of these factual disputes. Clearly however, both parties have significantly different views as to their respective level of knowledge about the agreement and its implications, particularly in the context of its overall fairness.
The legal principles applicable
At this stage, it is important to note that I am not dealing with the substantive issue between the parties, which is whether or not the child support agreement dated 29 October 2007 should be set aside. I propose fixing the 13th day of July 2009 as the day to be allocated for the determination of this issue.
In the meantime, what I have to do is to decide whether the operation of the agreement should be stayed and, if so, what alternative arrangements should be made to provide for the financial support of [X] and [Y] until the major issue is determined.
It is clear from the terms of section 111C(3) of the Child Support (Registration & Collection) Act that the court has a broad discretion in respect of granting a stay in the collection of child support. The court is directed to make whatever stay order it considers appropriate, after taking into account the interests of any person who may be affected by such an order.
In general terms, in granting any stay, the court should consider the following matters:
·Whether refusing to grant such a stay will make any subsequent proceedings regarding the applicable child support assessment or agreement nugatory or of no consequence;
·The balance of convenience to the parties concerned, particularly where financial hardship will fall if the stay is or is not granted;
·The financial needs of any child affected and how those needs should be properly supplied;
·Any delay in bringing an application for the stay in question;
·The bona fides of the stay;
·The merits of the substantive application.
In addition, pursuant to section 111B of the Child Support (Registration & Collection) Act 1988 the court has a wide range of general powers. These include an order for the payment of a weekly, monthly, yearly or other periodic amount of child support and the power to make any orders, which it considers appropriate.[4]
[4] See Child Support (Registration & Collection) Act 1988 at section 111B(1)(b) and (l)
Section 111B was inserted as a result of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006. Its operation commenced on 1 January 2007. The relevant explanatory memorandum indicates that the purpose of the legislation was to simplify the relationship between the courts and the new child support scheme.
As previously indicated, the new child support regime came into force from 1 July2008 onwards, which of course is after the parties executed the child support agreement in question. As a result of the various legislative changes, the legislature and indeed the Child Support Agency recognised that there would be a level of uncertainty as to whether child support agreements in force prior to 1 July 2008 would continue to have effect after this date, and if so, in what form.
Accordingly, the Agency was directed by the legislature to undertake a review of all child support agreements in force prior to 1 July 2008 so it could be determined whether those agreements contained provisions that would enable them to continue after the commencement date of the new legislation.[5]
[5] See Schedule 5 of Part 2 of the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 at item 73(1)
As a result of the legislative direction placed on him, the Registrar of the Child Support Agency has reviewed the child support agreement dated 29 October 2007 between Mr Delany and Ms Delany and determined that it will remain in force after 1 July 2008 and “transition” to the new child support regime.
As a result, the Registrar determined that the agreement in question would be a binding child support agreement, which would remain in force until 12 January 2024, the date prior to [Y]’s eighteenth birthday. It seems apparent that the reason the agreement was taken to be a binding child support agreement was that, on its face, the agreement makes no provision for any terminating event other than the younger child’s eighteenth birthday.
The transitional provisions make allowance only for the termination of child support agreements made prior to 1 July 2008 or for such agreements to be deemed binding child support agreements.[6]
[6] ibid at item 75
Agreements cannot transition to the new regime as limited agreements. More of the distinctions between the two types of agreement will appear shortly. The decision of the Registrar as to whether an agreement will or will not transition is subject to review in the Social Securities Appeal Tribunal. Neither party seems to have taken advantage of the review provisions.
The agreement in question makes no provision for any review of the level of payment. In particular, there is no provision for any automatic indexation of the $150 per week payment per child in the light of fluctuations to the consumer price index. The pro-forma document makes provision for parties to request the Child Support Agency to make such indexation changes. The parties have either intentionally or for some other reason chosen not to take advantage of this facility.
As a consequence of being a binding Child Support Agreement, although not directly described as such in the document in question, the agreement between the parties in this matter can only be set aside by reason of the provisions of section 136 of the Child Support (Assessment) Act 1989.
As is apparent from this section and the other applicable legislative provisions, the new child support regime has created two new specific forms of child support agreements, which were previously unknown – binding child support agreements and limited child support agreements. There are significant differences between the two types of agreements.
Given that the applicable transitional arrangements and the fact that the agreement between the parties in this case contains no specific terminating event, other than that provided by [Y]’s eighteenth birthday, which would in any event terminate the parties’ liability to provide child support for the children concerned, the Registrar of the Child Support Agency has determined that the agreement in question is a binding Child Support agreement.
Section 80C(2) of the Act sets out the requirements for a binding child support agreement. Such agreements must:
·Be in writing and signed by each of the parties;
·Contain a statement and certification that each party has received independent legal advice, in respect of the agreement, particularly regarding:
Ø The affects of the agreement on the rights of that party;
Ø The advantages and disadvantages, at the time of the making of the agreement, of entering the agreement in question.
These provisions mirror those concerning financial agreements in the Family Law Act 1975.[7] In the case of each legislation, an agreement is binding if and only the provisions of either section 80C (binding child support agreements) or section 90G (financial agreements) have been complied with. The central pillar of each provision is that the parties to both type of legislatively sanctioned agreement receive independent legal advice.
[7] See Family Law Act 1975 at section 90G
Section 4(3) of the Child Support (Assessment) Act recognises the desirability of parents reaching agreement for the financial support of their children. When interpreting the Act, the section requires that “the Act should be construed, to the greatest extent consistent with the attainments of its objects:
a)to permit parents to make private arrangements for the future financial support of their children; and
b) to limit interferences with the privacy of persons.”
The rationale of a number of recent major changes to both the Family Law Act and the child support regime, is the recognition by the legislature that conflict between separated parents is potentially extremely detrimental to the emotional and psychological wellbeing of children.
In particular, disputes over child support have been and are likely to continue to be a major source of ongoing and significant conflict between separated parents and, as such, to pose a potential threat to children. In this context the legislature is supportive of parents making private and binding agreements in respect of the provision of long term financial support for their children. The hope being that such consensual arrangements will lessen the potential for conflict between separated parents.
The provisions contained in section 80C seem to embody the government’s preferred ethos that parents should be free to negotiate about how and in what form child support will be paid, provided that they do so on a level playing field. The level playing field being provided by the fact that each will have a lawyer and will presumably be given a “warts and all” picture of what is and what is not in any particular agreement for each of them.
Clearly, when Mr Delany and Ms Delany entered into the child support agreement, which is currently before the court, neither was provided with an independent statement of any such legal advice, particularly the pros and cons of the agreement and its binding nature from any independent and qualified source. The only admonition to either party occurred in the form of the printed document itself, to which I have earlier made reference to.
In the current case, it is not hard to find potential pitfalls in the agreement, particularly if it remains in force for the next fifteen years or so. Principally over that period of time, the amount of child support payable will bear no relation to the actual cost of living.
Although, at the present time the economy is largely free of what has previously been described as “the inflation genie”, it is of course unknowable whether or not the Australian economy will be devilled by serious inflationary forces over the next decade or so.
Child Support Agreements potentially have serious and long term financial ramifications – for the children and parents concerned and also the Commonwealth Government, which provides financial support to the vast majority of care providing parents through the family tax benefit scheme. As a result, it is the Government’s intention that binding Child Support Agreements should be fairly and freely made between parties, after they have negotiated on an equal footing.
It is in this context, and by way of comparison that I turn to limited child support agreements, which are defined in section 80E of the Act. There is one fundamental difference between a binding and a limited child support agreement. For the latter, it is necessary for there to be an active administrative assessment of child support in place.[8] For the former, there need not be such a nexus between the agreement and the mainstream child support regime.
[8] See Child Support (Assessment) Act at section 92(3)
By necessary implication, one of the major purposes of the provision of independent legal advice to a party considering entering a binding child support agreement is that he or she will be appraised of the consequences of opting out of the formulaically based child support scheme. Given the pre-existence of an administrative formulation, such a requirement is not so compelling in the circumstances of a limited child support agreement and hence this would appear to be the rationale to dispense with the compulsory requirement for independent legal advice.
In addition the amount of child support payable pursuant to a limited child support agreement must either be for the same amount or a greater amount than that which would be calculated pursuant to the applicable statutorily based formulation of child support for any parties concerned. Hence the capacity to “opt out” of the administrative scheme for the calculation of child support is largely limited to binding agreements.
One of the more significant, if not the most significant consequence of the amendments brought about by the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Act 2006 is a change to the formulaic basis provided in the administrative scheme for the calculation of child support.
The intent of the various new applicable formulae was said to be that they would be more reflective of the actual needs of children affected by the child support system, as they were based on actual empirical research, and also the capacity of their parents to pay such child support. The amendments concerned were also said to be fairer as they provided more recognition of the various possible graduations in the division of parenting time between the parties to a child support assessment.
The relevant explanatory memorandum read as follows:
“This Schedule repeals Part 5 of the Child Support Assessment Act and replaces it with a new Part 5 that provides a new series of child support formulas. The new formulas are based on recent Australian research on the costs of caring for children, taking account of both parents' incomes after equal self-support amounts are deducted, recognising care of a child for more than 14 per cent of the time, and treating first and second families more equally.
The new administrative assessment adopts an 'income shares' approach to calculating the costs of raising children and sharing these costs fairly between parents. It involves working out the combined incomes of the parents, determining the costs of the parents' children by reference to their combined incomes, then distributing those costs between the parents in proportions equal to their share of the combined income, taking into account the contribution to the costs of the children they may make through providing care for the children.
Child support assessments will be based on the actual costs of children, which have been determined according to Australian research showing that, as parental income rises, spending on children rises in dollar terms but falls as a percentage of income, and that expenditure on children increases as they get older. The costs of children for Part 5 represent the best estimate of the amount that parents, on average, spend on their children according to their income.”[9]
[9] Explanatory memorandum to the Child Support Legislation Amendment (Reform of the Child Support Scheme – New Formula and Other Measures) Bill 2006 (circulated by the authority of the then Minister for Families, Community Services and Indigenous Affairs, The Honourable Mal Brough MP)
Accordingly, in this case, as far as I know, neither party was given specific advice regarding opting out of the legislatively based child support scheme, particularly the formulaically based method for the calculation of child support. In addition, their agreement is devoid of mechanisms to vary or discharge the agreement, if there is any material change in either of the parties’ circumstances, which was not reasonably foreseeable at the time it was entered.
Limited agreements:
·As previously indicated, do not require the provision of legal advice;
·Must be for an amount which is either equal to or greater than the amount of child support administratively assessed [section 80E(2)(b)];
·Like binding agreements, must be in writing and signed by each party to it.
The circumstances, which will permit the termination of a limited child support agreement, as opposed to a binding child support agreement, are also different. Binding agreements can only be terminated:
·By a subsequent binding child support agreement [Child Support (Assessment) Act section 80D(1)(a)];
·By a termination agreement;
·By a court order made pursuant to section 136.
Limited agreements can be terminated:
·By agreement between the parties formalised in either a further binding or limited child support agreement;
·By an order under section 136;
·By a termination agreement;
·If the agreement is more than three years old, by the written notice of either party [80G(1)(e)];
·If the amount which would have been paid pursuant to the applicable administrative assessment of child support changes by more than 15% in circumstances not contemplated by the agreement [the administrative assessment is referred to as the notional assessment – see section 80G(1)(d) and section 146B];
·If there is such a 15% variation from the notional assessment either party to the agreement may give 60 days written notice to terminate the agreement.
Accordingly, limited agreements have the scope for automatic termination. They can be terminated after a specific period of time – a period greater than three years; or they can be terminated if there is a disparity of more than fifteen percent, when the agreement is compared to the applicable administratively assessed amount of child support.
Accordingly, in the case of limited child support agreements, there remains a nexus between the statutorily based formula and the agreement, particularly in the sense that there must be some form of administrative assessment in place. The notional assessment process also has relevance for family tax benefits.
No such requirements are necessary for binding child support agreements. Hence, by necessary implication, the prerequisites for their enforceability are greater. Essentially, each party is required to receive exhaustive and independent legal advice about the implication of such an agreement, presumably also including what are the implications of departing from the safety net of the formula based system.
In addition, given the fact that the Registrar has determined that the child support agreement in question between the parties in this case is a binding child support agreement, the grounds for its setting aside are more limited being confined to the provisions of section 136(2) of the Assessment Act which reads as follows:
“136(2) 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:
(a)that the party’s agreement was obtained by fraud or a failure to disclose material information; or
(b)that another party to the agreement, or someone acting for another party:
(i) exerted undue influence or duress in obtaining that agreement; or
(ii) engaged in unconscionable or other conduct;
to such an extent that it would be unjust not to set aside the agreement; or
(c) in the case of a limited child support agreement:
(i) that because of a significant change in the circumstances of one of the parties to the agreement, or a child in respect of whom the agreement is made, it would be unjust not to set aside the agreement; or
(ii) that the agreement provides for an annual rate of child support that is not proper or adequate, taking into account all the circumstances of the case (including the financial circumstances of the parties to the agreement); or
(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.”
If the court set aside either a binding child support agreement or a limited child support agreement pursuant to the provisions of section 136(2) the court has a discretion to depart from what would otherwise be the applicable administrative assessment provided special circumstances exist and it would be both just and equitable and otherwise proper to do so [section 136(4)].
Accordingly the departure provisions of Part 7 of Division 4 are potentially enlivened by an application to set aside a child support agreement regardless of whether either of the parties concerned has made such an application. In addition the court is empowered to make any necessary consequential orders if an agreement is set aside [section 137]. Any such orders are to be informed by considerations of justice and equity.
In this case, it is the husband’s position that the combination of factors in this case render it an exceptional one, which justify the setting aside of the agreement. The wife does not agree.
As I am at pains to point to the parties, I am not directly dealing with this issue now. As a consequence, whether special circumstances exist to justify a departure from the child support agreement in question and the justice and equity of any such departure are not engaged at this stage.
Conclusions
If a stay is not granted to Mr Delany and the Agency elects to enforce against him, there is the possibility that some aspects of Mr Delany’s substantive application will be rendered nugatory, particularly in the short term. A significant sum of arrears of child support has built up since the agreement was entered.
Although it is difficult to see what assets the Agency could attach against to realise these arrears, if this occurred it is likely to be prejudicial to the husband. As would an application to garnish his income. In these circumstances, I am satisfied that the question of the stay is pressing from the husband’s point of view.
I do not question the bona fides of Mr Delany’s stay application. In addition, there has been little delay in bringing the application. In addition, it is difficult to think anything other than that his application has some merit.
Certainly, the application cannot be said to be a delaying tactic or one being driven for some ulterior motive. The agreement in question was executed in the period immediately following the parties’ separation, when emotions between them are likely to have been raw and issues to do with their future financial circumstances and needs were uncertain.
Neither party had any legal advice about the agreement. In particular, the agreement is devoid of some significant elements, which are likely to be prejudicial not only to the husband but also the wife. There are no mechanisms for the agreement’s termination or to increase the amount of child support to be paid.
Given the significant changes in the legislative topography pertaining to child support agreements, there is a level of administrative fiction in the Registrar determining that the agreement in question was a binding child support agreement. However, I concede that the Registrar was left with no real alternative in this regard, given the structure of the Act.
In all the circumstances of this case it is difficult to reach any other conclusion than that the father has an arguable case demonstrating sufficient weight likely to establish special or exceptional enough circumstances to warrant the setting aside of the agreement in question.
Neither party received independent legal advice prior to entering the agreement, which pursuant to the transitional provisions is deemed to be a binding child support agreement. The amount to be paid pursuant to the agreement is out of kilter with any provisional assessment of child support. In addition, in my view, the agreement is marked by many serious omissions, which are likely to be detrimental to both parties.
The more difficult task in this case is balancing the convenience of the parties, particularly in regards to financial hardship. There can be no doubt that the wife is not in a strong financial position. She is a modest and part-time income earner. The two children concerned live primarily with her. She is committed to [X] remaining at [S] School.
I have no reason to think anything other than that her calculation of her recurrent and unavoidable expenses is a reasonable one. Accordingly, at this stage, Ms Delany is struggling to make ends meet financially and has little if any room in which to move financially.
On the other hand, I also accept that the husband is not currently financially robust. I am unable to determine, at this stage, whether
Mr Delany is failing to exercise properly his income earning capacity. If necessary, this issue must await determination at trial.
In these circumstances, I must accept that his current annual salary is in the vicinity of $45,000.00, which is considerably less than he was earning in October of 2007. This cannot be regarded as a lavish salary. Although Mr Delany has been criticised for overstating his weekly level of expenditure, I accept that he has had to reaccommodate himself. I also do not think that it can be said that he leads a lavish or extravagant lifestyle.
In all these circumstances I do not think that it can be said that he has negligently allowed the arrears of child support to build up in this case. To my mind, it is significant that the statutorily assessed level of child support is markedly out of kilter to that which Mr Delany is paying pursuant to the applicable child support agreement.
Bearing all these matters in mind, I have come to the conclusion that it would be appropriate for the operation of the child support agreement herein to be stayed pursuant to the operation of section 111C(3).
I accept that such an order will constitute a considerable hardship to Ms Delany and the financial interests of [X] and [Y].
However, balancing the respective interests of the parties concerned, I consider that it would be appropriate for the agreement to be stayed on condition that Mr Delany pays child support on the basis of the applicable child support formula. This leaves the issue of the school fees.
It is likely to have the potential to be extremely upsetting and detrimental to [X] if she is forced to leave her current school prematurely because of financial forces. Issues to do with [Y]’s education, given her age, are less pressing. It may ultimately prove to be the case that, notwithstanding both parties’ desire that their children have a private education, they are not able to afford such an education at this juncture.
Again, this may be an issue for another day and the final hearing of the matter, particularly whether special circumstances exist sufficient to justify a departure both from the child support agreement and potentially from any administrative assessment of child support. Until that hearing, given that it is likely that both parties acquiesced to [X] attending the school in question, it seems to me appropriate that both make a contribution to the payment of the fees involved.
Accordingly, I propose staying the operation of the child support agreement from the date of these orders. As a consequence of this order, the father’s liability for child support will be assessed pursuant to the applicable child support formula. I will stay the Registrar of the Child Support Agency from collecting any arrears of maintenance from the husband. However, for the reasons I have set out, I will make it a condition of the stay that the father contribute one-half of the costs of [X]’s school fees to attend [S] School.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and eight (108) paragraphs are a true copy of the reasons for judgment of Brown FM
Associate: P Smith
Date: 8 May 2009
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