A recent case involving a woman wishing to overturn a prenuptial agreement may mean big changes for how such agreements are handled in Australian law. Previously, a pre-nuptial agreement (or binding financial agreement, as they are known in Australia) were a good way to keep your assets safe in the event of a marriage breakdown.
Couples intending to marry can enter into a prenuptial agreement setting out how their assets will be divided if their marriage breaks down. The requirements of such agreements are quite strict, including that both parties obtain their own independent legal advice. You can not enter into this type of agreement without the help of a solicitor.
The Family Law Act also allows people who are thinking of marrying or entering into a de facto relationship (as well as people who are already married or in a de facto relationship) to make an agreement setting out how their assets will be divided if they do end up separating.
Prenuptial Agreement: The Case
In the case of Throne v Kennedy, the woman took her ex-husband to court over a prenuptial agreement that she had agreed to sign the night before her wedding. She was engaged to marry a wealthy and well-known property developer.
The landmark case started way back in 2006 when the then 67-year-old property developer met the 36-year-old Eastern European woman on a website for potential brides. From the very beginning of the relatoinship, Kennedy told Thorne that if they were to marry, she would need to sign an agreement as he wished to bequeath his assets for his children from previous relationships. Kennedy had a lavish life in Australia, with assets worth around $20 million while Thorne had barely any assets and struggled to speak English. However, seven months after they begun talking, she packed her bags and relocated to Toowoomba.
The High Court judge stated that Thorne had left behind her lifestyle to marry Kennedy, and that if the relationship ended, she would have nothing to fall back on. With her limited English skills, she would have struggled to find a job or a home of her own. The court heard that she signed the prenuptial agreement when Kennedy threatened to call off the wedding if she refused to sign. That was despite independent legal advice that the agreement was “entirely inappropriate” and the worst her solicitor had ever seen. She then signed another agreement 30 days after the wedding.
Together, the agreements limited her claim to any property settlement to $50,000 after three or more years of marriage. The pair divorced in 2011 after three years of marriage. In 2012, Thorne took her ex-husband to court for a property settlement of $1.24 million and spousal maintenance. While Kennedy died in 2014, his estate continued to fight in the legal battle.
The Federal Circuit Court initially found in favour of Ms Thorne, on the basis that her consent had been negated by way of “undue influence and duress”. Mr Kennedy’s estate appealed to the Full Court of the Family Court of Australia. The appeal was successful, with the Family Court finding Ms Thorne’s consent had not been affected by undue influence. She appealed that decision, and was granted special leave to the High Court in March this year, with the appeal heard in August.
The grounds of appeal are:
• That the Full Court erred in law in failing to find the Financial Agreements were not binding and should be set aside on the ground of duress;
• That the Full Court erred in law in failing to find the Financial Agreements were not binding and should be set aside on the ground of undue influence;
• That the Full Court erred in law in failing to find the Financial Agreements were not binding and should be set aside on the ground of unconscionable conduct in circumstances where the husband took unconscionable advantage in securing the Appellant’s signature to them.
In its decision, the High Court unanimously found the agreements should be set aside for “unconscionable conduct”, while a majority of the High Court also held that the agreements should be set aside for “undue influence”.
“The findings and conclusion of the primary judge should not have been disturbed,” the High Court wrote. “The agreements were voidable due to both undue influence and unconscionable conduct.
“The fact that Ms Thorne was willing to sign both agreements despite being advised that they were ‘terrible’ serves to underscore the extent of the special disadvantage under which Ms Thorne laboured.”
The decision has sent shock waves throughout the family law fraternity, as it is no longer clear whether binding financial agreements will be upheld under family law.
If you need any assistance in ensuring your prenuptial agreement is adequate or if you need help in any aspect of family law, then contact us today. At Groom & Lavers, our team of friendly and experienced family lawyers will help you navigate even the most stressful circumstances.