Prenuptial Agreements – to have and to hold until?
A recent High Court decision in the case of Thorne v Kennedy ruled that two prenuptial agreements that the wife signed were voidable due to both undue influence and unconscionable conduct.
Section 90K of the Family Law Act 1975 refers to circumstances in which a court may set aside a financial agreement or termination agreement, including:
- If the agreement was obtained by fraud (including non-disclosure of a material matter); or
- If a party entered into the agreement for the purpose of defrauding or defeating a creditor or creditors of the party; or
- If a party entered into the agreement with reckless disregard of the interests of a creditor(s) of the party; or
- If a party entered into the agreement for the purposes of defrauding another person who is a party to the de facto relationship with a spouse party; or
- If the agreement is void, voidable or unenforceable; or
- If circumstances have arisen since the agreement was made which makes it impractical for the agreement or part of the agreement to be carried out;
- If, since the making of the agreement, a material change in circumstances has occurred (being the circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will suffer hardship if the court does not set the agreement aside; or
- If a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.
Section 90UM of the Family Law Act 1975 has similar provisions applying to de facto partners.
In Thorne v Kennedy, the parties met over the internet. The wife, aged 36, lived in the Middle East and had no substantial assets. The husband, aged 67, had assets worth between $18 to $24 million and had 3 adult children.
The wife moved to Australia with the intention of getting married. Before they were married, the husband told the wife she would have to sign a prenuptial agreement.
Less than 2 months before the wedding, the husband instructed his solicitor to prepare a prenuptial agreement. The husband told the wife that if she did not sign it the wedding would not go ahead.
10 days before the wedding, the wife met with her solicitor who advised her not to sign the agreement as the agreement was drawn to protect the husband’s interests solely and that the wife had been put under significant stress in the lead up to the wedding. The solicitor was concerned that the wife was only signing the agreement so that the wedding would not be called off. The wife signed the agreement anyway.
Slightly more than a month later (and after the wedding), the parties signed another agreement in similar terms to the prenuptial agreement. Again the wife’s solicitor advised her not to sign the agreement but she signed it anyway.
Slightly less than 4 years after the marriage, the parties separated. The wife sought orders from the court setting aside the two agreements, an adjustment of property order in the amount of $1.1 million and a lump sum spousal maintenance order of $104,000.
At first instance the trial judge set both agreements aside for duress and undue influence, in that the wife’s circumstances led her to believe that she had no choice and was powerless to act in any way other than to sign the prenuptial agreement.
The husband appealed to the Full Court of the Family Court. The Full Court of the Family Court, however, overturned the trial judge’s decision allowed an appeal and concluded that the agreements had not been vitiated by duress, undue influence or unconscionable conduct. They held that the wife could not have been subject to undue influence because she acquiesced in the husband’s desire to protect his assets for his children and because she had no concern about what she would receive on separation. They also held that the husband’s conduct was not unconscionable because he did not take advantage of the wife.
The wife appealed to the High Court. The High Court allowed the appeal, made orders to set side orders of the Full Court of the Family Court, made orders that the appeal to the Full Court of the Family Court be dismissed with costs and ordered that the husband pay the wife’s costs of the appeal to the High Court.
If you are thinking of entering into a prenuptial agreement, it is important that you and your future spouse:
- Have equal bargaining power;
- Have been given independent advice (separately) by solicitors practicing in family law;
- Have ample time to read and understand the agreement and the consequences of the agreement should you separate;
- Use an interpreter to interpret the agreement and also in consultation with your lawyer if English is not your first language;
- Not be pressured or threatened into signing an agreement.
Have a question about prenuptial agreements or financial agreements? Contact us at (03) 9555 7233 or at firstname.lastname@example.org.
Reference: Thorne v Kennedy  HCA 49
This article provides information that is general in nature and is not a substitute for legal advice.