Binding Child Support Agreements
The recent case of Masters & Cheyne 2016 FamCAFC 255 highlights how critical it is to enter into a Binding Child Support Agreement (“BCSA”) with caution, with comprehensive and carefully considered legal advice, and with an open mind about how the Agreement can deal with potential changes in the families’ circumstances as years go by, particularly if very young children are the subjects of the BCSA.
Many parents enter into informal arrangements where it comes to child support payable to one of the parties in the event of a separation, whilst others rely upon the Department of Human Services (Child Support) (“DHS”) to assess their liabilities and entitlements from time to time. However, it is increasingly common for parties to consider entering into formal child support agreements, often in conjunction with a negotiated property settlement, and where there is consensus about how the children of the relationship are to be raised (such as attending a private school, for example).
Parents can enter into a “Limited Child Support Agreement” where they record the particular way in which they wish for child support to be dealt with between them, and there is no requirement for lawyers to be involved. However as the name suggests these Agreements are limited in the sense that they can more easily be set aside or terminated and there is also provision for such Agreements to terminate after 3 years as long as one party gives notice to the DHS that they wish to terminate the Agreement.
Binding Child Support Agreements, on the other hand, require both parties to have received specific legal advice about the advantages and disadvantages to them in entering the Agreement, and the effect of the Agreement on their rights. A lawyer for each party must sign the Agreement to certify that the advice has been given and the BCSA must then be registered with the DHS.
Binding Child Support Agreements allow parents the freedom to set their own terms about financial arrangements for the children going forward, but can also be difficult to terminate or set aside if a party changes their mind about the Agreement later on or if there are changes to the families’ circumstances that have not been anticipated by the parties at the time of signing the Agreement.
In Masters & Cheyne the parties had entered into a Binding Child Support Agreement in 2008 in relation to their three children who were then under 18 year of age. In 2008 the youngest child lived with the mother 9 nights out of each fortnight and with the father the remainder of the time.
In September 2012 the youngest child (by then the only child still under 18 years of age) started living solely with the father as the mother relocated interstate. The father therefore applied for the BCSA to be set aside. The primary Judge agreed that exceptional circumstances had arisen since the signing of the BCSA and that the father would suffer hardship if the BCSA were not set aside.
The mother appealed to the Full Court of the Family Court and ultimately it was held that the primary Judge had erred and that the BCSA should not be set aside. Whilst the 3 appeal Judges disagreed as to whether the change in living arrangements represented “exceptional circumstances”, they were unanimous that the father would nonetheless not suffer “hardship” from the change in circumstances that was required to set aside the BCSA (in circumstances where the father earned around $192,000.00 per annum and held personal net assets of over $1.1m).
When considering the specific terms of a BCSA, it is open to parties to list their own terms as to when they agree the BCSA can be terminated such as where there is a significant change in the care arrangements for the children. It was open to the parties to do so in this case, and they did not. Justice Aldridge in particular stated that “it is readily foreseeable that children’s living arrangements will change over time. The longer the period covered by an agreement, the prospect of a significant change becomes more likely.”
Whilst it can be hard to attempt to “foresee” anything that might happen into the future, it is important to consider potential changes as much as possible prior to entering into a Binding Child Support Agreement, and to list specific terminating events.
In addition, if there is to be a formal agreement at all, it may be more appropriate in the circumstances to only enter into a Limited Child Support Agreement which provides less long-term certainty but which can also avoid long-term risk.
27 June 2017