28 Nov High Court Tears Up Prenuptial Agreement
Principal of Justice Family Lawyers, Hayder specialises in complex parenting and property family law matters. He is based in Sydney and holds a Bachelor of Law and Bachelor of Communications from UTS.
The couple, Mr Kennedy and Ms Thorne, met online in 2006 on a website for potential brides.
At the time, Mr Kennedy was a 67 year-old Greek-Australian property developer with assets worth between $18 million and $24 million.
He was a divorcee with three adult children.
Ms Thorne was a 36 year-old Eastern European woman living in the Middle East.
Unlike Mr Kennedy, Ms Thorne had no substantial assets.
A few months after their initial meeting, Ms Thorne moved to Australia to live in Mr Kennedy’s penthouse.
The property in question was lavish, with four bedrooms, five bathrooms, multiple balconies and an upper roof deck with pool.
The wedding between Mr Kennedy and Ms Thorne was scheduled in September of 2007.
Ten days before the wedding, however, Mr Kennedy took Ms Thorne to see an independent solicitor about the terms of the prenuptial agreement.
Earlier on in their relationship, Mr Kennedy had informed Ms Thorne that ‘you will have to sign paper[s]’ or the wedding would not happen. He stated this was because ‘my money is for my children’.
The prenuptial agreement stated that if the couple separated within the first three years of marriage, Ms Thorne would receive nothing.
If the separation occurred after 3 years and the couple did not have children, Ms Thorne would receive a single lump sum of $50,000- an amount described by the lawyer as piteously small.
If the couple separated after three years and had children, a $500,000 unit would be provided for their use.
Upon seeing the contract, the independent solicitor told Ms Thorne: ‘It is the worst contract I have ever seen. Don’t sign’.
Additionally, the lawyer claimed she had ‘significant concerns’ Ms Thorne was only signing the prenuptial agreement so the wedding would not be called off.
The High Court’s Decision: Kennedy v Thorne
In June 2011, less than four years after their wedding, the couple separated.
Ms Thorne began legal proceedings in April 2012, seeking to have the prenuptial agreement- and a similar post-nuptial agreement-set aside.
The case was first heard in the Federal Circuit Court in 2015, which ruled the prenuptial agreement was not valid.
However, in 2016, this decision was overturned by the Family Court.
On November the 8th, 2017, the High Court upheld the Federal Circuit Court’s original ruling and set aside the prenuptial agreement on the basis of unconscionable conduct.
In a joint judgment, the High Court ruled that ‘Mr Kennedy took advantage of Ms Thorne’s vulnerability to obtain agreements which … were entirely inappropriate and wholly inadequate’.
Implications for other Binding Financial Agreements
With around 40% of marriages ending in divorce, the concept of preparing a prenuptial agreement is becoming more common.
A prenuptial agreement, or otherwise known as a prenup, is a contract between a couple that sets out how assets and property will be divided if the relationship breaks down.
The agreement must comply with strict legal requirements to be valid and enforceable.
The agreement must be in writing, each party to the relationship must obtain independent legal advice and both parties to the relationship must sign the agreement.
It is notable that there are limited circumstances in which the Court will set aside a prenup.
This is because the requirement for separate independent legal advice means it is hard for one party to prove that they did not understand the consequences of what they were signing.
Furthermore, the Court will also not set aside an agreement simply because it is unfair to one of the parties.
However, this case showcases that when the conduct of one party is unconscionable- meaning not right or unreasonable- an otherwise legally binding financial agreement can be set aside by the Courts.
A Binding Financial Agreement (BFA) include prenuptial agreement’s but also covers agreements during and following a marriage.
The agreement outlines the financial arrangements between the parties when the relationship ends.
A BFA deals with the allocation of property, money and other assets. It can also be used to determine how debt is to be covered by the parties.
A financial agreement may also include the parties’ agreement on child maintenance, child support and spousal maintenance.
Superannuation and claims on an estate after death are also other parts that can be included by a BFA.