Drafting Pre-Nuptial Agreements after Thorne v Kennedy
It is perhaps stating the obvious to note that the matter of Thorne v Kennedy [2017] HCA 49 has caused a stir for those seeking, drafting or interpreting pre and post-nuptial agreements. What once might have appeared relatively certain in this field of family law is now beset with interesting questions and puzzling ambiguities.
It is axiomatic to state that financial differentials between parties to such agreements are part of the very relationship dynamic that leads a party to seek out the ‘pre-nup’ in the first place.
Concern from lawyers and clients post-Thorne can perhaps be summarised in this way: not only was there the usual variation in the parties’ financial fortunes, but both had received independent legal advice and followed through with the wedding. And yet the High Court concurred with the primary judge in striking down the agreements for undue influence and unconscionable conduct.
We explore the particular facts of this case, and the High Court’s application of legal and equitable principles. Some key signposts within the judgement can assist those required to tackle the post-Thorne pre-nuptial – and indeed post-nuptial – agreement.
The facts of Thorne v Kennedy
The parties met online and struck up a romantic relationship in 2006. Mr Kennedy then visited Ms Thorne in Europe, buying gifts, travelling with her and meeting her family. By the time the couple arrived in Australia in February 2007, they had known each other for seven months and had the intention to marry.
The fiancé was a man of some means. In contrast, the fiancée Ms Thorne had little in the way of possessions. In August of 2007, Mr Kennedy approached his lawyer for the purposes of drafting a pre-nuptial agreement. He presented this to his fiancée, indicating to Ms Thorne that she must sign the agreement prior to the marriage. She obtained legal advice strongly advising her not to sign. The amounts and terms purported to support Ms Thorne into the future were considered to be pitifully low. However, Ms Thorne ultimately signed the document. Following the wedding, a post-nuptial agreement was presented to Ms Thorne – in almost identical terms. This too was signed by the new bride, once more against legal advice.
Further pertinent facts were put forward about the time in question, including the haste expressed by Mr Kennedy and the considerable pressure placed upon Ms Thorne as a result of the timing of his demands. The wedding was booked, her relatives had arrived in Australia for the event. Their Honours[1] quoted with approval the primary judge’s “vivid description” of the facts [47]:
“She was in Australia only in furtherance of their relationship. She had left behind her life and minimal possessions … She brought no assets of substance to the relationship. If the relationship ended, she would have nothing. No job, no visa, no home, no place, no community. The consequences of the relationship being at an end would have significant and serious consequences to Ms Thorne. She would not be entitled to remain in Australia and she had nothing to return to anywhere else in the world. Every bargaining chip and every power was in Mr Kennedy’s hands. Either the document, as it was, was signed, or the relationship was at an end. The husband made that clear.”
In August 2011, the couple separated and in April 2012, Ms Thorne sought an order setting aside the original agreements. The property settlement sought in the application was significantly greater than that set out in the two earlier documents. The primary judge set aside the agreements but that decision was overturned on appeal to the Full Court, reinstating the agreements. Ms Thorne then appealed to the High Court for relief.
The legal dimensions
Currently, the amendments to the Family Law Act introducing Pt VIIIA allow couples to make regulated financial agreements. This includes financial agreements made either before marriage or after marriage; described respectively as pre-nuptial and post-nuptial agreements. Pertinent to this case, a party to a “financial agreement” can apply to have the agreement set-aside pursuant to s.90K(1) of the Family Law Act for various reasons, including with respect to the making of the agreement, if a party has engaged in unconscionable conduct.
As stated by the majority of the High Court of Australia at [22]:
“The only issues were whether the agreements should be set aside because Ms Thorne was subject to any of the vitiating factors of duress, undue influence, or unconscionable conduct in her entry into each of the agreements and whether the reasons of the primary judge were adequate.”
Ultimately the majority of the High Court determined that undue influence and unconscionable conduct were present on the part of Mr Kennedy against Ms Thorne. Nettle J and Gordon J drew a slight distinction, proposing that only unconscionable conduct was present.
Considering the issues of undue infliuence and unconscionable conduct
Within the majority judgment, their Honours certainly took time to parse and examine the legal differences between duress, undue influence and unconscionable conduct – with the latter two holding doctrinal sway.
Yet aside from legal analysis, it was interesting to read the Court’s notable deference to the factual and evidentiary findings of the primary judge: given her Honour’s ability to examine the parties at close hand, the original judge had the ability to make uniquely accurate findings about any alleged pressure that might have been brought to bear against Ms Thorne.
Indeed, their Honours agreed with the primary judge’s concern that Ms Thorne had signed a document that was “the worst her solicitor had ever seen”: [44].
Helpfully, the Court provided guidance about some of the factors which might have prominences when evaluating the likelihood of pre or post-nuptial agreements being able to withstand scrutiny, as:.
“(i) whether the agreement was offered on a basis that it was not subject to negotiation;
(ii) the emotional circumstances in which the agreement was entered including any
explicit or implicit threat to end a marriage or to end an engagement;
(iii) whether there was any time for careful reflection;
(iv) the nature of the parties’ relationship;
(v) the relative financial positions of the parties; and
(vi) the independent advice that was received and whether there was time to reflect on that advice” at [60].
Approaching the post-Thorne v Kennedy Future
So where does Thorne leave practitioners who are drafting pre and post-nuptial agreements? It is worth noting that the Court was open to the fact that there will often be differences of power and financial worth in these arrangements. Indeed, pre-nups are by definition an attempt to protect assets from a less-financial partner in defined circumstances.
In Thorne, the factual circumstances appear to be remarkably dire – and multi-pronged. Ms Thorne’s financial, emotional and social situation combined with Mr Kennedy’s hasty and intractable demands, seem to have conflated into a perfect storm of undue influence and unconscionable conduct.
But this is not to say that any and all such agreements will fall over in favour of the less powerful spouse. Other unique pressures were in play, not least of which was the short timeframe between the revelation by Mr Kennedy of the existence of the first agreement, the demand that it be signed by Ms Thorne before the wedding, and the wedding itself.
Extreme haste on the part of one party can be a warning bell for courts when scrutinising such documents. The drafting party might facilitate independent legal advice yet keep ‘the foot on the pedal’ until the rushed wedding has occurred – regardless of the types of warnings given to Ms Thorne by her lawyer. A post-nuptial agreement presented shortly after the wedding and without any alleviation of the pressure will do little if anything to support the claims of the stronger party.
Further sources of undue pressure included the presence of Ms Thorne’s European family in Australia for the wedding (and no known way of them paying for return without Mr Kennedy’s assistance), plus the complete organisation of venue, dress, cake etc for the impending nuptials.
Other influences included Ms Thorne’s strong desire to have a child and at the age of 37, her marriage to Mr Kennedy appeared the only viable avenue for securing this long-held hope.
Pre and post-nuptial agreements are of course here to stay. And by their very nature, one party will propose an agreement in order to protect assets that are of a higher net value than those possessed by the other party. After all, such a mainstream reality is the rather unremarkable raison d’etre of the pre-nup.
Yet the protection of one party’s situation cannot be procured at any cost. The exploitation of known weaknesses and desires in the other party will not be viewed favourably. Nor will the existence of untold haste, which by itself and in combination with other pressures leads the more vulnerable party to feel that they have no other option but to sign.
Perhaps the old axiom “marry in haste, repent at leisure” has a multitude of useful applications.
If you would like to discuss the case or seek advice about its implications with respect to a specific financial agreement, contact Giles Stapleton of 9th Floor Selbourne Chambers on 02 9233 5188 or gstapleton@selbornechambers.com.au
[1] The plurality: Kiefel CJ, Bell, Gageler, Keane and Edelman JJ
