RAKE & RAKE

[2018] FCCA 3181

FEDERAL CIRCUIT COURT OF AUSTRALIA

RAKE & RAKE [2018] FCCA 3181

Catchwords:
CHILD SUPPORT – Application to set aside binding child support agreement and arrears – effect of Family Assistance and Child Support Legislation Amendment (Protecting Children)Act2018 – whether or not the court can make orders pursuant to s136 of the Child Support (Assessment) Act 1989 (Cth) with respect to a terminated agreement.

Legislation:

Child Support (Assessment) Act 1989 (Cth), ss.80C, 80C(2)(e), 80D, 80D(2), 80D(2A), 81(1)(a) 136, 136(1), 136(2), 140, 141(1)(b)
Child Support (Registration and Collection) Act 1988 (Cth), s.111C
Federal Circuit Court of Australia Act 1999, s.17A
Family Assistance and Child Support Legislation Amendment (Protecting Children)Act2018

Cases cited:

Simpson and Hartnett [1984] FamCA 62

Masters & Cheyne [2016] FamCAFC 255

Applicant: MR RAKE

Respondent: MS RAKE

File Number: MLC 3474 of 2012

Judgment of: Judge Harland

Hearing date: 18 September2018

Date of Last Submission: 18 September 2018

Delivered at: Melbourne

Delivered on: 5 November 2018

REPRESENTATION

The Applicant: In person

Counsel for the Respondent: Dr Smith

Solicitors for the Respondent: Sayer Jones

ORDERS

1. The application filed on 12 June 2018 is dismissed.

IT IS NOTED that publication of this judgment under the pseudonym Rake & Rake is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLC 3474 of 2012

MR RAKE

Applicant

And

MS RAKE

Respondent

REASONS FOR JUDGMENT

1. The applicant filed an initiating application on 12 June 2018 seeking interim orders for a stay of the binding child support agreement he and the respondent had entered into on 22 December 2015 pursuant to s.111C of the Child Support (Registration and Collection) Act1988 (Cth).

2. He sought final orders setting aside the binding child support agreement and sought an order that he be released from all arrears of child support accrued since 31 July 2017.

3. In his supporting affidavit the applicant seeks to set aside the agreement pursuant to s.136 of the Child Support (Assessment) Act 1989 (Cth) (“CSAA”) on the basis that the parties’ youngest son [X] stopped living with the respondent on 31 July 2017 and has spent very little time with the respondent since.

4. For the reasons I will explain, I am satisfied that s.136 of the CSAA does not apply and the application must be dismissed.

5. The applicant says that he cannot afford the child’s living expenses and 50% of his education expenses, as well as paying child support to the respondent. He does not provide details of those expenses in his affidavit. He also filed a financial statement.  In his financial statement he deposes to his expenses exceeding his income.  Under part E of his financial statement he refers to his wife and his adult son Mr H but rather than providing their average gross incomes as required, he simply writes “available if required”.  He does show in part F that his wife pays the mortgage and also pays for living expenses.

6. He pays child support in the sum of $284 a week.

7. The agreement provided for the respondent to receive child support for Mr H if Mr H resumed living with her more than seven nights a fortnight.  That did not occur and Mr H is now 19.

8. Pursuant to the agreement, the applicant is liable to pay child support for [X] of $1006 per month indexed annually in accordance with the consumer price index.  The current figure is $1135.01 per month.  In addition, the parents are required to pay 50% of his tuition fees and expenses for school books and uniforms.

9. The applicant says that on 31 July 2017, [X] called him and asked the applicant to collect him from his mother’s home as he did not want to continue living with his mother.  The applicant says that since then [X] has not spent any overnight time with her and has almost no contact with her.

10. The applicant says he is working as a trainee (occupation omitted) earning $58,000 gross and that he is supporting Mr H financially whilst studying his second year of a four year university degree.  His current wife is paying the mortgage and renovation expenses on their home.

11. He says that the respondent is working part-time but has the capacity to work full-time.

12. The respondent filed a response on 29 June 2018 seeking that the application be dismissed.  She filed an affidavit in support that same day.

13. She says that the parties initially entered into the binding child support agreement on 12 December 2013 and final property orders were made on 13 December 2013.  Final parenting orders were made on 4 May 2015. 

14. On 22 December 2015 the parties entered into a new binding child support agreement terminating the former one.  The respondent says that the parenting orders were consistent with the recommendations in the family report and provided for [X] to live with her and Mr H to live with either parent at his election, noting that at the time he was living with the father. If that was to discontinue, there were further orders made that the children spend time and communicate with the parent they were not living with and for the boys to spend regular time with each other.

15. The respondent gives a different version of events as to how [X] went to live with his father and the difficulties she has had in contacting him since then.

16. She disputes the applicant’s claimed inability to pay education expenses and child-support. She refers to the home he and his wife purchased which they have been renovating and various trips they have taken in the past couple of years. 

17. The respondent says she is employed on a casual basis working 5 or 6 days a week.

18. The applicant appeared self-represented on both occasions the matter came before me. The respondent was represented by counsel. The respondent sought orders summarily dismissing the application pursuant to s.17A of the Federal Circuit Court of Australia Act 1999 on the basis that the effect of the Family Assistance and Child Support Legislation Amendment (Protecting Children)Act2018 coming into force on 1 July 2018 is that there is no agreement to set aside.

19. As the legislation came into effect on 1 July 2018, which was the day before the first return date, I granted an adjournment to enable the applicant to obtain legal advice with respect to the impact of the legislation on the arrears and whether or not the Court can make orders under s.136 of the CSAA to backdate what is an already terminated agreement to effectively extinguish the arrears and to address any payments made by the applicant.

20. I was satisfied on that occasion that the Court has no power to grant a stay as the effect of the legislation is that the agreement terminated on 1 July 2018.  The notation I made to the Orders on 2 July 2018 was made to assist the applicant when approaching the child support agency about the garnishing of his wages and the arrears. Unfortunately, the applicant did not get independent legal advice, and instead he spoke to the child support agency.

21. The Family Assistance and Child Support Legislation Amendment (Protecting Children)Act2018 makes several amendments to CSAA, including inserting a new subsection (2A) to s.80D(2) of the CSAA.

22. Section 80D of the CSAA deals with the circumstances where binding child-support agreements are terminated. Section 80D(2A) reads as follows:

    (2A)     A binding child support agreement is terminated in relation to a child by force of this subsection if:

    (a)  a party (the former carer ) to the agreement who is entitled to be paid or provided child support for the child (disregarding section 67A) under the agreement ceases to be an eligible carer of the child; and

    (b)  the period of 28 days after the former carer ceases to be an eligible carer of the child ends without the former carer again becoming an eligible carer of the child; and

    (c)  the agreement is not suspended under section 86 on the day after the period ends as a result of that cessation; and

    (d)  a child support terminating event does not occur under subsection 12(2AA); and

(e)  the former carer continues to be entitled to be paid or provided child support for the child under the agreement despite ceasing to be an eligible carer.

Note: The agreement may continue in relation to other children to whom the agreement relates if the person does not cease to be an eligible carer of those children (see section 87).

1. The effect of the Family Assistance and Child Support Legislation Amendment (Protecting Children)Act2018 is that the agreement terminated automatically. The Bill received Royal Assent in May 2018 and came into effect on 1 July 2018. The relevant section from that bill is s.80D(2A) which is located in Schedule 1, Part 3, Division 2. Section 2 of the Bill address commencement times for various parts of the Bill. Relevantly it provided that Schedule 1, Part 3, Division 2 commences on the later of 1 July 2018 or the day after the Act receives Royal Assent.

2. The real issue of concern for the applicant is the arrears that have accrued since [X] came into his care.

3. The respondent’s Counsel confirmed that it is common ground that [X] has spent hardly any time with her since July 2017. Section 80D(2A) of the CSAA provides that 28 days after a change of residence the agreement automatically terminated.

4. The applicant says that the Department of Human Services (“DHS”) has been garnishing his wage.

5. The applicant told the Court that DHS told him that they would not stop garnishing his wage without an order for a stay.  Given the effect of the legislation, it is not possible to order a stay of the agreement given the agreement had already been terminated and no longer exists.

6. The respondent’s Counsel encapsulated the issue the Court now has to consider which is whether or not the Court has any power to retrospectively set aside arrears incurred pursuant to a now terminated agreement.

7. Section 136 of the CSAA is set out below:

   136 Power of court to set aside child support agreements or termination agreements

   (1) A party to either of the following agreements may apply to a court having jurisdiction under this Act for the court to set aside the agreement:

   (a)  a child support agreement that has been accepted by the Registrar under section 92 or 98U;

   (b) a termination agreement, or a written agreement referred to in paragraph 80G(1)(b), that has been accepted by the Registrar under section 92.

   (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

   (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.

8. The difficulty the applicant faces is that s.136(1) makes clear the section applies to circumstances where a party seeks to set aside an agreement. In this instance, the agreement has been terminated so there is no agreement to set aside.

9. The applicant argued that although the contract was terminated, the Court could still enforce the provisions pursuant to s.136(2)(a) of the CSAA. He argued that there were exceptional circumstances where the change in living arrangements were not foreseeable and he relied upon the various documents, which are mentioned below, which he tendered as exhibits.

10. Exhibit A is a child support account statement issued on 18 August 2018 showing arrears owing of $4,780.27.  It shows that some of the arrears have been reduced by salary deductions and also show the penalty of $35.80 for late payment being charged. The following page is a child support assessment for the period 1 July 2018 to 30 September 2019. It reflects [X] being in the applicant’s care for 94.06% of the time and the respondent being assessed to pay child support to the applicant in the sum of $35.58 per month.

11. Exhibit B is a transaction summary which does not advance matters as it refers to payments which have no descriptions. Included in the bundle are payslips which show the applicant’s salary being garnished for child support and that payslip is for the period of 9 June 2018 to 22 June 2018. He includes further payslips including the period post 1 July 2018. In the period 2 July to 20 July 2018 the sum of $526.31 was deducted for child support from his salary. As the assessment for the period 1 July 2018 requires the respondent to pay child support to the applicant, I infer that the child support being collected is for arrears with respect to the period the agreement was in force.

12. The respondent’s Counsel submitted that the applicant faces three hurdles:

    a)The Court must be satisfied that s.136 applies to the agreement even though it has been terminated;

    b)The applicant must  establish exceptional circumstances; and

    c)The applicant must provide evidence of hardship.

13. All three of these matters must be satisfied before the Court can determine whether or not to exercise its discretion.

14. Section 140 sets out the general powers of the Court. Section 141(1)(b) gives the Court powers retrospectively but they must be linked to s.136.

15. The critical issue is the status of the terminated binding child support agreement.

16. Section 81(1)(a) states that an agreement is a child support agreement if the agreement is a binding child support agreement. There is no dispute that the agreement complies with the requirements. Section 80C defines binding child support agreement. Section 80C(2)(e) is applicable. An agreement is binding on the parties if and only if the agreement has not been terminated under section 80D. As discussed above the agreement has been terminated pursuant to section 80D(2A).

17. Section 136 sets out the power of the court to set aside child support agreements or termination agreements. Section 136(1)(a) would be the applicable subsection as the agreement was accepted by the Child Support Registrar.

18. Assuming for the moment that the applicant has overcome the first hurdle, the respondent’s Counsel submitted that the applicant has failed to establish that there are exceptional circumstances as required by s.136(2)(d) which empowers the Court to set aside the child support agreement if it is satisfied that the course of exceptional circumstances relating to a party to the agreement or a child in respect of whom the agreement is made:

    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.

19. The respondent’s Counsel relied on the Full Court of the Family Court decision of Masters & Cheyne [2016] FamCAFC 255. In that case Murphy J discusses the interpretation of the expression “exceptional circumstances” at [42] to [44].  He refers to the exceptional meaning of unusual or out of the ordinary. Aldridge J at [155] said that a change of residence in itself is not exceptional. The circumstances were exceptional in Simpson and Hartnett [1984] FamCA 62 because the change of residence took place within two weeks of final orders being made.

20. The respondent submits that as the agreement itself contemplated the possibility that the oldest child would change residence, the applicant could not reasonably say that it is not foreseeable that the youngest child would change residence too. However, the test is not whether or not the applicant should or could have foreseen a reversal in the living arrangements for [X] but whether or not that change amounted to exceptional circumstances.

21. The applicant simply states in his affidavit that he will suffer hardship if the agreement is not set aside. He does not provide evidence as to what he has paid or what he would be entitled to receive from the respondent. He referred to paying school fees from the bar table but does not provide any evidence with respect to that.

22. In reply to the respondent’s submissions, the applicant submitted that he was not asking that the agreement be set aside retrospectively but that the arrears be dealt with.

23. The respondent also raises the issue of delay. The applicant made his application 11 months after the change of circumstances. It is clear that the applicant did not simply ignore the situation as evidenced by the letters sent by his lawyers last year. The applicant tendered letters from his then lawyers to the respondent’s lawyers.  Berry Family Lawyers sent a letter dated 6 September 2017 to the respondent’s lawyers.  In that letter the applicant’s lawyer raised the issue of terminating the child support agreement and entering into a new agreement based on the fact that [X] was now living with the applicant. The proposal was that the new agreement would be in essentially the same terms except that the applicant would not be required to pay child support to the respondent for [X].

24. The applicant further tended a second letter which is from Anderson Family Lawyers to the respondent’s lawyers dated 19 December 2017 noting that they have not received a reply to the letter of 26 October 2017.  In that letter, they raise the issue of discharging the current parenting orders and entering into new parenting orders reflecting the fact that [X] had been living with the applicant for four months and again raising the issue of the binding child-support agreement and the consequent financial pressures on the applicant.  I pointed out that it was unreasonable for the respondent to expect that the applicant continued to pay child support for a child she did not have the care of.  These are all reasonable issues to raise. There is no evidence that the respondent’s lawyers responded to any of these issues. The respondent’s Counsel argues that although the applicant sent letters through his then solicitors, he still delayed in bringing the matter to court by about 6 months.

25. What the applicant has not provided are any figures as to what he has paid, what the arrears are, what is outstanding and what the effect of setting aside the agreement back dated to 31 July 2017 would be. This is relevant in order for the court to determine hardship. The father submitted that there were no arrears as at 31 July 2017 but he has not provided evidence to that.

26. Exhibit C is the child support account statement dated 18 August 2018. It is with respect to arrears of $4,700 and refers to a short period. It does not give any indication as to what the position was in July 2017 as to now. There is no evidence as to whether the arrears of $4,700 relates to arrears for a period prior to 31 July 2017 when there was a change of residence. The Court also does not have an assessment as to what would have been payable as at 31 July 2017. However, I note the current assessment provides for the mother to pay what is a token monthly payment to the father.

27. Whilst it seems unfair that the applicant is required to pay child support for a child in his full time care, when parties enter into a binding agreement they are contracting out of the administrative child support system.

28. Before entering into a binding child support agreement, parties must receive independent legal advice addressing the following:

    80C  Making binding child support agreements

    (1)  An agreement is a binding child support agreement if:

    (a)  the agreement is binding on the parties to the agreement in accordance with subsection (2); and

    (b)  the agreement complies with subsection 81(2).

    (2)  For the purposes of subsection (1), an agreement is  binding on the parties to the agreement if, and only if:

    (a)  the agreement is in writing; and

    (b)  the agreement is signed by the parties to the agreement; and

    (c)  the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:

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

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

    (d)  the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and

    (e)  the agreement has not been terminated under section 80D; and

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

1. A binding child support agreement gives both parties certainty. They enter into these agreements knowing what their obligations are regardless of a change in fortunes of one or both parties for better or worse.

2. In this case I am satisfied that s.136 does not apply and therefore the applicant fails to meet the first hurdle. Given this, it is not necessary to consider whether the applicant has demonstrated that these are exceptional circumstances and that the applicant would suffer hardship, although I have briefly discussed the arguments made above. The application must be dismissed.

I certify that the preceding fifty-two (52) paragraphs are a true copy of the reasons for judgment of Judge Harland

Date: 5 November 2018