Thorne v Kennedy: Prenuptial Agreements

Prenuptial agreements are binding financial agreements that couples can enter into before they marry. These agreements outline how property will be divided in the event of a marriage breakdown. A recent family law matter involving a prenuptial agreement, Thorne v Kennedy [2017] HCA 49, ended up being heard before the High Court of Australia. In this case, it was determined that a prenuptial agreement that had been signed by both parties was invalid and unenforceable. The reason was that the agreement had been signed by one of the parties in circumstances where there was undue influence and unconscionable conduct. It is yet to be seen how far-reaching the implications of this case are on prenuptial agreements that may end up being considered by the courts.

Thorne v Kennedy

There was a significant age gap between the husband and wife who married in this case. Ms Thorne was 36 when she married Mr Kennedy, who was 67.

There also had been a significant difference in wealth between the parties prior to the marriage. Ms Thorne had no substantial assets at the time of the marriage, whereas Mr Kennedy had assets that were worth between $18 and $24 million.

The couple met online in 2006 while Ms Thorne was living overseas. Ms Thorne moved to Australia in February 2007, about seven months after meeting Mr Kennedy. The wedding was set for later that year on 30 September 2007.

Mr Kennedy had a prenuptial agreement drawn up and told Ms Thorne that if she did not sign the agreement, there would not be a wedding. He provided this agreement to Ms Thorne for the first time on 19 September 2007, 11 days before the wedding. He took her the next day to see a lawyer so that she could be given legal advice on the agreement. Ms Thorne’s family had already flown to Australia for the wedding, and all the preparations for the wedding had been made.

The solicitor who provided advice to Ms Thorne on the agreement advised that the amount Ms Thorne would receive on the dissolution of the marriage was “piteously small” when taking into account Mr Kennedy’s wealth. She also advised her not to sign the agreement and told Ms Thorne that it was the worst agreement of that sort she had seen. She also noted that Ms Thorne appeared to be “under significant stress” in preparing for the wedding and that it seemed she had been put in a situation where the agreement needed to be signed for the wedding to go ahead, regardless of whether it was fair.

Ms Thorne signed the agreement four days before the wedding date despite being given legal advice that to do so was not in her best interests. She also signed another agreement after she was married to Mr Kennedy that contained similar terms.

After the marriage broke down the enforceability of the prenuptial agreement came into question. The question as to whether Ms Thorne signed the agreement under duress, undue influence or as a result of unconscionable conduct was first considered by a trial judge in the Family Court. This judge found that the agreement was made as a result of duress and undue influence. Mr Kennedy appealed the matter to the Full Family court, his appeal was upheld, and the judgement of the trial judge was overturned. Ms Thorne then brought the matter to the High Court, and the High Court found in her favour. The majority found that the contract was voidable as it was made as a result of undue influence and unconscionable conduct. The remaining judges found that there had been unconscionable conduct but not undue influence. It could be said that the poor behaviour of Mr Kennedy caused the agreement to be voidable.

Implications of this case for bad contracts made as a result of poor behaviour

Many prenuptial agreements that are executed in similar circumstances to the agreement in this case, could potentially be set aside as a result of the decision. This may extend to other bad contracts that have been made as a result of poor behaviour.

What can be learnt from this case is that prenuptial agreements should be signed well before the wedding date. In circumstances where one party’s wealth far exceeds that of the other, extra care and attention should be taken to ensure there is no undue influence or duress.

Also, the following takeaways are worth noting:

1. Even if both parties receive independent legal advice this does not preclude a court from determining that one of them signed an agreement under duress; and
2. A court can still determine that a party had entered into an agreement under duress even where a second agreement was entered into at a later time.

What was not considered in Thorne v Kennedy

The Family Law Act 1975 allows parties in family law to agree on binding financial agreements between themselves that may not be a good bargain for both of them. Section 90(1A) of the Act outlines how such an agreement can be made. Agreements made under this provision have been upheld by the Family Court despite them being a bad bargain for one of the parties. The case of Thorne v Kennedy did not consider this section of the Act, and it remains unsettled as to when a bad bargain will be upheld over a division of property that is just and equitable.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.