Pre-Nuptial or Binding Financial Agreements are Agreements are between people intending to marry or enter into a domestic relationship, who are already in one or who want to get out of one. They are legally binding contracts.
The law governing these Agreements is the 1975 Family Law Act. The Court cases where such Agreements have been challenged set out very strict criteria for the wording of the Agreements and the circumstances surrounding their being entered into. The relevant parts of the Family Law Act are Part VIIIA, being Sections 90A to 90Q in relation to marriages and Division 4, being Sections 90UA to 90UN with regard to de-facto relationships.
The interesting case of Thorne v Kennedy
So, what is interesting about Thorne and Kennedy? The facts of the case, which was finally decided by the High Court of Australia in November 2017, make interesting reading.
Ms Thorne met Mr Kennedy (not their real names) over the internet in 2006. Ms Thorne, aged 36, was an eastern European woman, living in the Middle East. Mr Kennedy was a 67 year old Australian property developer with assets of between $18 and $24 million. He was divorced with 3 adult children. Ms Thorne had no children.
They holidayed in Europe and then moved to Australia in February 2007 and lived in Mr Kennedy’s expensive east coast penthouse, with the intention of marrying. The wedding was set for Sunday 30 September 2007.
On 20 September, 10 days before the scheduled wedding, Mr Kennedy took Ms Thorne to see a lawyer, a Ms Harrison, who is an Accredited Family Law Specialist, about signing a Pre-Nuptial Agreement. He told Ms Thorne that, if she did not sign, the wedding was off. Ms Thorne did not know the contents of the Agreement until she saw Ms Harrison. By then, Mr Kennedy had flown Ms Thorne’s parents and her sister to Australia from eastern Europe, the wedding invitations had gone out, the wedding dress was made and the reception booked.
The Pre-Nuptial Agreement provided:
- That Ms Thorne receive $4,000 per month during the marriage, or 25% of the net income from the management rights of a property development which Mr Kennedy was undertaking, whichever was the greater;
- Ms Thorne could live rent free in a penthouse in the proposed development and her family live in a unit there. However, the local council had refused planning permission for the development;
- If the parties separated in the first 3 years of the marriage, Ms Thorne got nothing;
- If they separated after 3 years, with no children, she would get $50,000;
- If Mr Kennedy died while they were together, Ms Thorne got the penthouse or a unit in the same city to a value of not more than $1.5 million, 40% of the net management rights of the proposed development or $5,000 per month, whichever was the greater, and she kept her Mercedes Benz car.
The lawyer, Ms Harrison, urged Ms Thorne not to sign the Agreement, saying that she was under significant stress leading up to the wedding, which would not proceed unless she signed. The lawyer said that it was the worst Agreement she had ever seen.
The Agreement was signed by the parties on 26 September, four days before the wedding, which took place as scheduled. On 5 November, some weeks after the wedding, Ms Thorne signed a second, post-wedding Agreement, essentially the same as the first, despite her lawyer again urging her not to do so.
The parties separated in August 2011. There were no children of the marriage. Under the Agreement Ms Thorne was entitled to a lump sum payment of $50,000 – that was all.
In April 2012, Ms Thorne issued Court proceedings seeking that the two Agreements be set aside, that she receive a $1.1 million property settlement and $104,000 lump sum spousal maintenance. In May 2014, Mr Kennedy died during the trial. His executors, who were two of his adult children, continued the case on behalf of the estate. The single Judge in the Family Court found in Ms Thorne’s favour. The executors appealed to the Full Court of the Family Court, who upheld their appeal. Ms Thorne then appealed to the High Court.
The High Court decided that Ms Thorne had been subjected to “undue influence and unconscionable conduct”. She had been “powerless” – believing that she had no choice but to sign the Agreement or the wedding would be called off. That would have had many consequences – she was on a temporary visa in Australia, she was entirely reliant on Mr Kennedy, both financially and to be able to stay in Australia, she was eager to have a child and the upcoming marriage had been publicised to her family and friends, many of whom had travelled from overseas.
The easiest solution was to sign the Agreement – she honestly believed that the marriage was forever. The High Court upheld Ms Thorne’s appeal – she won.
So, how could Mr Kennedy have had the Agreements drafted with some confidence that they would be enforced if the marriage broke down?
For a start, he should have begun the process a lot earlier than 10 days before the wedding – several months before.
He should not have threatened to call off the wedding if Ms Thorne did not sign and he should have been much more generous with his money – of which he had ample - Ms Thorne “only” asked for $1.1 million and $104,000 spousal maintenance.
With Mr Kennedy’s considerable wealth, he could have offered her a lot more and that may well have satisfied her lawyer and led to the lawyer advising her to sign the Agreements.
The end result for Ms Thorne was that the case was settled by negotiation following the High Court decision and, while the terms of the settlement were confidential, we can assume that she received a significant amount.
If you are considering entering into a Pre-Nuptial or other Binding Financial Agreement with your partner, or if you already have one and are concerned about its terms, or you have clients, family or friends in that situation, our team of Family Lawyers are able to advise you.