High Court of Australia sets aside Pre-Nuptial Agreements

On 8 November 2017 the Australian High Court handed down a decision that is being touted as a landmark ruling in the area of Binding Financial Agreements (often referred to as pre-nuptial agreements).

The factual circumstances of this case were:-

1. The husband and wife met online on a website for potential brides in 2006. Ms Thorne was 36 years old with no substantial assets, spoke Greek and a little English. She was living in the middle east at the time they met. Mr Kennedy was 67 years, a property developer worth between $18 and $24 million and was divorced with three adult children.
2. The husband travelled overseas to meet the wife and had told her that if he liked her then he would marry her but that “you will have to sign paper. My money is for my children.”
3. The wife moved to Australia in about February 2007 and commenced living with the husband with the intention of getting married on 30 September 2007.
4. In August 2007 the husband instructed his solicitor to prepare a pre-nuptial agreement. In September 2007 the husband told the wife that they were going to see solicitors about signing the agreement. When the wife asked whether he required her to sign the agreement he replied that if she did not sign it then the wedding would not go ahead.
5. The husband then took the wife and her sister to see an independent solicitor. The husband waited outside the appointment in the car. By this stage the wife’s family had travelled to Australia for the wedding, guests had been invited to the wedding, the dress had been made and the reception was booked.
6. After the meeting with the independent solicitor, that solicitor produced a written advice to the wife which she subsequently explained to her. The solicitor’s evidence was that the agreement was entirely inappropriate and that she had told the wife not to sign it. The wife understood the solicitor’s advice to be that the agreement was the worst agreement that the solicitor had ever seen. Despite this advice from the solicitor, 4 days before the wedding, the wife signed the first agreement.
7. The first agreement contained a recital that that within 30 days the two parties would sign another agreement in similar terms. The terms of that second agreement was substantially identical to the first.
8. The wife again met with the solicitor to obtain advice on the second agreement and again the solicitor urged the wife to not sign the agreement. Again, the wife ignored the advices of the solicitor and signed the agreement.
9. The husband and the wife separated in August 2011, without children. The wife sought orders from the court that the two agreements be set aside, sought a property order in the sum of $1.1 million and a lump sum spousal maintenance order of $104,000.00.

The primary judge found that the wife was powerless and believed that she had no choice to do anything other than sign the agreement. If the wife had not signed the agreement, then the relationship would have been at an end which would have had serious consequences for the wife as she would not have been entitled to remain in Australia and had nothing to return to. The primary judge expressed the opinion that every bargaining chip and every power was in the hands of the husband. The primary judge set aside both agreements.

On appeal to the Full Court of the Family Court that decision was reversed however, the wife then appealed to the High Court.

The High Court supported the primary judges findings and set aside both agreements on the basis of unconscionable conduct and undue influence. The agreements were set aside even though the wife had received legal advice not to sign the agreements and elected to do so anyway.

The High Court found that the husband “created the urgency with which the pre-nuptial agreement was required to be signed and the haste surrounding the post-nuptial agreement and the advice upon it.” They further found that “Mr Kennedy took advantage of Ms Thorne’s vulnerability to obtain [the] agreements.”

The matter has now been referred back to the Federal Circuit Court to determine the wife’s application for property orders.

This decision again highlights the importance of both parties obtaining expert advice prior to having a Binding Financial Agreement prepared and prior to signing.