Renew Your LIV Membership

               Don't miss out on your benefits                              

Renew Now
Select from any of the filters or enter a search term
Calendar
Calendar

Why the hysteria around Thorne and Kennedy? Are ‘pre-nups’ still an option?

Why the hysteria around Thorne and Kennedy? Are ‘pre-nups’ still an option?

By Therese Borger

Family Court 

0 Comments


Therese Borger is an associate at Kennedy Partners and recognised as a Rising Star in the Doyle’s Guide to the Australian Legal Profession for 2018.

After a busy month of schooling our federal politicians on their eligibility criteria, the High Court handed down Thorne v Kennedy [2017] HCA 49. Publications including the Courier Mail, The Australian and The Age all reported the case as signalling the ‘death knell of financial agreements’….and they say lawyers have a flair for the dramatic! So now that everyone has digested the 51 page judgment, and the 24 hour news cycle has progressed what impact will it really have?

The facts

In essence, the judgment restored the first instance decision of the Federal Circuit Court to set aside two financial agreements entered into by 36-year-old Ms Thorne (a foreign national with no assets of significance) and 67 year old Mr Kennedy (An Australian resident worth about $18 million).

One agreement was entered into four days prior to the wedding, and one shortly after the marriage. Both agreements were identical in nature and sought to determine how the property of the parties and each of them would be distributed if the marriage broke down; which it did. So one sided were the terms that Ms Thorne’s lawyers described her client’s entitlements under the agreements as “piteously small”. If the marriage lasted less than three years, she got nothing. If it lasted more, she received a lump sum of $50,000 (indexed for CPI). Accordingly, she was advised not to sign.

Financial agreements

Under the Family Law Act ("the Act"), couples can enter into financial agreements prior to, during, or following the breakdown of a marriage; the purpose being to oust the jurisdiction of the family law courts to determine property settlement proceedings in accordance with the Act. To be binding, it must adhere to formal drafting requirements and each party must have obtained independent legal advice. If drafted and executed correctly, the agreement is then enforceable under the Act unless set aside by virtue of any other lawful reason.

The tests

The major issue in Thorne v Kennedy was the question of the application of the various equitable contract law doctrines of duress, undue influence and unconscionable conduct to intimate relationships. The judgment provides an excellent summary of these differing and yet overlapping tests. The upshot of this decision was that the Court set aside the agreements on the basis of undue influence.

The Court confirmed that it was correct for the trial judge to consider the unfair and unreasonable terms of the agreements as a vitiating factor. The Court agreed with the trial judge’s description of Ms Thorne’s bargaining position, namely:

  1. Her lack of financial equality with Mr Kennedy;
  2. Her lack of permanent status in Australia at the time;
  3. Her reliance on Mr Kennedy for all things;
  4. Her emotional connectedness to their relationship and prospect of motherhood;
  5. Her emotional preparation for marriage; and
  6. The public nature of her upcoming marriage.

But what about her advice?

The Court found “it can be an indicium of undue influence if a pre-nuptial or post-nuptial agreement is signed despite being known to be grossly unreasonable.” The take away message for lawyers drafting and advising on these agreements is that an obviously unfair agreement is open to challenge and likely to, itself, be evidence that the weaker party entered the agreement in circumstances amounting to unconscionable conduct, undue influence or duress.

Conclusion

Rather than throwing financial agreements to the wind and rejoicing in not having to explain to clients the somewhat difficult relationship between contract law and family law, this case simply gave us a much better understanding of the current law. In the words of Ms Thorne’s lawyer – the terms of these agreements were after all “the worst [she] had ever seen.”

This case will be considered at a special seminar, ‘Thorne v Kennedy: a positive development?’ on Thursday 1 February 2018 from 7.45-9.00am.


Disclaimer: Views expressed by commentators are not necessarily endorsed by the Law Institute of Victoria Ltd (LIV). No responsibility is accepted by the LIV for the accuracy of information contained in the comments and the LIV expressly disclaims any liability for, with respect to or arising from any such views.

Be the first to comment