Kydon Segal Lawyers


Prenuptial Agreements (or Binding Financial Agreements) and Undue Influence

A recent ruling by the High Court of Australia has highlighted potentially the end of the prenuptial agreement, or a binding financial agreement, as it is known in Australia.

In the case of Thorne v Kennedy (both pseudonyms as neither party can be identified in a Family Court case), a young Eastern European woman successfully fought to overturn a prenuptial agreement she had signed on the eve of her wedding to a wealthy developer twice her age, claiming she felt she had no choice but to sign the agreement despite receiving advice from her solicitor not to sign the document without negotiating major changes to the agreement.

Ms Thorne had met Mr Kennedy on a website for potential brides. Seven months after they met, Ms Thorne, who had no substantial assets and only spoke limited English, moved to Australia to marry Mr Kennedy. The primary judge noted that Ms Thorne left behind “her life and minimal possessions” and would be left with nothing if the relationship ended.

Shortly before the wedding, Mr Kennedy insisted Ms Thorne sign the prenuptial agreement or the wedding would be called off. Ms Thorne signed the agreement despite receiving advice from her solicitor that the agreement was the worst agreement he had ever seen and was “entirely inappropriate”. She then signed another similar 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, despite Mr Kennedy owning assets worth between $18-24 million. The pair divorced after three years of marriage and Ms Thorne sought a property settlement of $1.24 million, including spousal maintenance. Although Mr Kennedy died prior to the matter being resolved, his estate continued to fight Ms Thorne.

The Federal Court initially found in favour of Ms Thorne, finding that her consent had been negated by way of “undue influence and duress”. Mr Kennedy’s estate then appealed to the Full Court of the Family Court of Australia.

The appeal was successful, with the Court finding that Ms Thorne’s consent had not been affected by undue influence. She then appealed the decision and was granted special leave to the High Court of Australia.

In its decision, the High Court unanimously found the agreements should be set aside while a majority also found the “agreements were voidable due to both undue influence and unconscionable conduct”. They found that Ms Thorne was at a special disadvantage in the relationship, that there was such a severe inequality in the relationship where, despite receiving independent advice not to sign the documents, she felt she had no choice but to sign the documents. The Court found Ms Thorne was not provided the opportunity to properly examine her position in relation to the agreement  and that her judgemental capacity has been tarnished by the actions of Mr Kennedy and the pressure he placed upon her at the time.

The consequences of this High Court decision is that it seems to spell trouble for the binding nature of these financial agreements. It is a warning for all solicitors and their clients to properly negotiate and advise on these agreements where the parties involved have unequal bargaining power as it is almost impossible for a couple to have equal bargaining power due to differences in age, wealth, state of health or mental capacity when drafting these agreements. A fair outcome for the less wealthy party in these negotiations is the safest way to ensure the financial agreements are binding in their nature it seems.

We will keep you posted with any further developments in this area of law.

Contact us at Kydon Segal Lawyers if you would like to discuss any aspect of family law.