5.4.6 Setting Aside a Transaction
A court has the power to prevent a payer disposing of property, or to set aside a transaction in which a payer disposed of property. The court must be satisfied that the transaction is being made, or was made, to defeat the payer's ability to pay child support or to meet a child support debt or liability owed to the Registrar.
Order to set aside a transaction
The CSRC Act gives the Registrar the power to apply to the court for an order to set aside a transaction if the court is satisfied that the transaction has been made to defeat or reduce the payer's ability to pay child support (section 72C). The court can also make an order without an application from the Registrar.
Example: A payer with a significant debt sold his house to his brother for $200,000. It appears that this was not an 'arm's length transaction' (a genuine sale between unrelated persons at a fair market price) as the market price would have been about $400,000. It may be that there was an intention to avoid the payment of child support by selling the property. If an enforcement summons is currently being heard, the Registrar should inform the court or else apply to the court to have the transaction set aside.
The wording of section 72C is similar to the wording of FL Act section 106B.
If the court is satisfied that the transaction has been made, or is proposed to be made, to reduce or defeat the payer's child support liability then the court can set aside the transaction. This will make the transaction void (section 72C(2)).
The court can order that any money dealt with in the arrangement can be taken to pay child support or costs. The court must consider any other people genuinely affected by the proceedings and can make orders to protect those people (sections 72C(3) and (4)). Where a property that has been sold is sold again to a bona fide third party for value, in order to protect innocent third parties who would otherwise be unfairly penalised, the court will generally not set aside the transaction.
The court can order the payer, or any person colluding with the payer in making the transaction, to pay the costs of:
- the payee,
- any third party genuinely affected, or
- the Registrar,
which they incurred by making the transaction or the proposed making of the transaction (section 72C(5)).