Mother Wins Appeal Against Decision to Set Aside Binding Child Support Agreement

Background

In the recent case of Telama & Telama (No 2) [2017] FamCAFC 194 (15 September 2017) the Full Court of the Family Court of Australia (Ryan, Kent & Cleary JJ) heard the payee mother’s appeal against Judge Henderson’s decision to set aside a Binding Child Support Agreement. The payer father successfully argued at first instance that the agreement should be set aside as his income had decreased from $710,000 per annum (when the agreement was made) to $220,000 per annum and he had no other financial resources from which to pay child support.

Purpose of Binding Child Support Agreement

The Full Court of the Family Court stated the point of a Binding Child Support Agreement (entered into after the parties have received independent legal advice) is that it provides certainty for the parties as to the amount to be paid by way party to the other, therefore essentially contracting out of the child support assessment regime. As might be anticipated, of the various mechanisms by which parties agree for the payment of child support, these types of agreements are the most difficult to change. They cannot be varied and may only be terminated in limited ways, and as such it is obvious ‘that each party to such an agreement takes a risk that the certainty they gain by entering into such agreement is balanced against the difficulties in changing it’.

In Masters & Cheyne (2016) FLC 98-072 per Aldridge J and Murphy J stated that the circumstances in which a Binding Child Support A greement may be set aside are governed by s 136 of the Child Support Assessment Act (“Assessment Act”). Section 136(1) of the Assessment Act provides for acceptance by the Child Support Registrar of a child support agreement as a precondition to a party having standing to seek relief pursuant to s 136(2)(d). It is uncontroversial that the parties’ binding child support agreement was accepted by the Registrar.

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

‘(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:

(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.

Exceptional Circumstance Test

The central issues in this case were whether the respondent’s changed financial circumstances constituted an exceptional circumstance for the purpose of s 136(2)(d) and amounted to hardship within the meaning of the provision. The primary judge was satisfied that the requirements in s 136(2)(d) were established. Concerning these matters the primary judge was satisfied the test for ‘exceptional circumstances’ was ‘tough’ and ‘the bar is high’ but ‘not impossible’ and that the respondent carried the onus. As the primary judge understood, this meant that the respondent needed to establish on the balance of probabilities the facts relied on by him at the relevant time.

Disclosure Obligation

The respondent conceded on appeal that he did not comply with his obligations as to disclosure. He knew he was required to comply with r 24.03 of the Federal Circuit Court Rules 2001 (Cth) (‘FCCR’). In cross-examination the respondent acknowledged that he had been served with a Notice to Produce documents and generally understood his obligations as to disclosure. At least in some respects the Notice to Produce replicated the requirement for the production of documents which, in accordance with r 25A.08(2) of the FCCR the respondent was obliged but failed to provide, such as his taxation returns for the three most recent financial years (r 25A.08(2)(a)).
This was particularly significant as this was the respondent’s most recent taxation assessment and his case for the 2013 agreement to be set aside was based on:
• A material reduction in his income from when the 2013 agreement was made;
• That he had since become liable for ‘significant and unmanageable debts’ including liabilities to the Australian Taxation Office; and
• That he had since become liable for a significant claim to the liquidator of a company in which he had an interest.

Further, it was the respondent’s contention that he would suffer hardship because he could not meet the obligations of the agreement, even if he applied all of his after tax income to the payments that he was required to make, and had negligible other assets and financial resources upon which to call.

Respondent’s Disclosure

The respondent:
1. Gave no evidence as to his taxable income in any year under consideration;
2. Personally prepared but made no attempt to obtain copies of the relevant taxation returns;
3. Provided no documents setting out the taxation debts upon which he relied;
4. Failed to disclose settlement of an action with an employer for which he received approximately $45,000
5. Failed to disclose the existence and sale of shares said to have realised approximately $174,000 in late 2014

The trial transcript records her Honour’s disquiet at the respondent’s inadequate disclosure and her recognition that full and frank disclosure was central to the Court’s ability to determine the application to set aside the agreement.

Non-Disclosure Issues

In many respects the issues that arose by reason of non-disclosure resonated with the issues in Hardman & Hardman[2003] FamCA 1057 (‘Hardman’). In Hardman, Coleman J (on appeal) discussed the consequences of a party’s failure to comply with that person’s disclosure obligations. In terms of the importance of disclosure, Coleman J stated that the relevant issue before the learned federal magistrate was the financial resources of the appellant, from whatever sources those derived.

As decisions of the Full Court of this Court in cases, commencing with Oriolo & Oriolo [1985] FamCA 54; (1985) FLC 91-653 make clear, where a litigant does not make a full and frank disclosure of his or her financial position, that litigant cannot benefit or rely upon the inability of the opposing party by reason of that failure to disclose to suggest a particular capacity or the existence, identity or location and nature of particular assets or resources. A moment’s reflection would reveal why that must be so. Any other course would not only encourage litigants to fail to make a full and frank disclosure, but provide a positive incentive for concealment in that regard.

Conclusion

In this case the primary judge did indeed make findings as to exceptional circumstances and hardship to the respondent, notwithstanding his inadequate disclosure. In the Court’s view, where the fact of non-disclosure was so obvious and material it was necessary for the primary judge to explain how and why the respondent’s oral evidence and unsworn explanations were sufficient to meet that deficiency and resolve the confusion created by his failure, for example, to produce necessary and requested documents. Her Honour’s reasons do not address that conundrum and in circumstances where the legal onus sat with the respondent the findings as to ‘exceptional circumstances’ and ‘hardship’ were not available.”

Orders

The appeal was allowed, the order set aside and the case remitted for re-hearing before another judge.

Leave a Reply