There has been much media hype about a recent decision by the High Court in Thorne –v- Kennedy (2017) HCA49, with some claiming that such a decision means Prenuptial (or Binding Financial Agreements as we call them in Australia) are dead and buried. Nothing could be further from the truth.
There is nothing unusual about the decision. In fact, at first instance, the Trial Judge set aside the agreement due to undue influence and unconscionable conduct.
The Full Court overturned that decision and the High Court effectively upheld the Appeal and reinstated the earlier decision by the single Judge.
In summary, the facts of this case was that the wife was a 36 year old eastern European woman who was living in the Middle East. She could speak only a little English and she had no assets. The husband was a 67 year old property developer who had significant wealth, said to be between $18M and $24M.
It was said that the agreement was a bad legal agreement for Ms Thorne, in that it did not provide a substantial settlement to her, but did provide some minimal sum. The lawyer acting for Ms Thorne provided evidence as to the nature of the agreement, but more importantly, that evidence pointed to the fact that her client had been placed under significant stress in the lead up to the wedding and had been put in a position where she must sign the agreement regardless of its fairness, so that the wedding could go ahead.
The problem here for Mr Kennedy was that he had insisted upon the signing of the agreement prior to the wedding and in fact, even sat outside in a car, whilst Ms Thorne was at the solicitor’s office signing the agreement some four days before the wedding. The agreement also made mention about signing a further agreement post marriage. One wonders why such a term was even necessary.
It was also very relevant when the Court looked at Ms Thorne’s position in that she was totally reliant upon Mr Kennedy. She had been brought out to a new country and her family had also travelled out for the wedding. There was no offer by Mr Kennedy to return her and her family back to her home country, should she not sign the agreement.
Ms Thorne was in fact, total reliant upon Mr Kennedy and his financial support, once she arrived in Australia. The fact that Mr Kennedy made it a condition of the marriage that she sign the agreement and also, arranged for the drafting and signing of the Agreement so close to the wedding pointed, understandably, to a finding of undue influence.
All of the factors combined, clearly indicated that Ms Thorne was under enormous stress and put in the position where she really had no choice, but to sign the agreement.
The case highlights a number of important aspects to consider when entering into a Prenuptial or Binding Financial Agreement. A few important things to consider are as follows:
Get proper legal advice and have the agreement done properly.
There is too much emphasis in trying to do things cheaply and quickly when they involve pre-nuptial Binding Financial Agreements. You cannot purchase these agreements on the shelf. There is no “quick fix” solution that will solve the problem.
If you want to put in place an arrangement that determines how and when assets are divided at some future time, should you separate, then you need to invest money, time and effort into making sure the job is done properly.
That means briefing the right lawyers to do the right job and to ensure that it is done properly. If one wants a cheap lawyer and a quick job, then one carries the inherent risks that the agreement will simply not be a valid one.
Ensure that the agreement is not done prior to a wedding.
It is common, for people to suddenly realise that they might need a Prenuptial Agreement before their marriage. A friend may have said to them, “do not walk down the aisle until you have a prenup signed”. In Australia, there is no necessity or rush to do this. Agreements are called Binding Financial Agreements so they can be signed after a wedding and be just as valid as agreements signed before the wedding.
The issue about whether you intend to marry someone and whether you intend to have a Financial Agreement are entirely separate. Do not intermingle them and make sure they stay separate. If you do not want to marry someone, do not marry them.
It can never be a condition of your marriage or your relationship, that the other party sign an agreement. If you do make it a condition, then you run the risk of the agreement being set aside. The agreement must be entered into with the free will of both parties.
Make sure that each party does not suffer any detriment should they not sign the agreement.
If you are intending to bring your future spouse overseas to marry you, then make sure you are committed 100% to that decision prior to bringing them from overseas. Do not bring a partner – whether they can speak English or not, to Australia and make them leave their family and homeland and then tell them that they have to enter into an agreement before getting married.
Do it before they come and explore options. Talk about financial arrangements prior to bringing someone overseas to Australia and work out a suitable arrangement prior to them making a decision to come to Australia and get married.
Take time and draft and execute the agreement with due care and due diligence.
Make sure there is a proper cooling off period. The agreements should never be signed in a rush. Make sure there is a proper translation of the agreement for people who do not have English as their first language.
Make sure drafts are exchanged and that the other party is represented by an independent lawyer who has been chosen independently by the other party and not by the other spouse.
Make sure there has been a full and detailed disclosure and that sufficient time has lapsed for each party to consider their rights and the effect of the agreement. In my view, agreements should never be signed within 30 days of the first drafts being exchanged.
There are many other things that can be done to ensure that the agreement are really binding in nature and can last.
They must be drafted carefully and entered into with the advice and guidance by experienced accredited specialists in family law, who understand the factors they may void an agreement in the future.