5.4.6 Setting aside a transaction
A court has the power to prevent a payer of an enforceable maintenance liability or carer liability from disposing of property, or to set aside a transaction in which a payer disposed of property.
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 or restrain 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
- to pay a debt owed to the Registrar under an enforceable maintenance liability, or meet that liability, or
- to pay a debt owed to the Registrar under a carer liability, or meet that liability (CSRC Act 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 CSRC Act 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 (CSRC Act section 72C(2)).
The court can order that any money dealt with in the arrangement can be taken to pay child support or costs. When doing so, the court must consider any other people genuinely affected by the proceedings and can make orders to protect those people (CSRC Act 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 (CSRC Act section 72C(5)).