Australia: Pre-nuptial agreements: If you like it…put a prenup on it, or should you?

Last Updated: 6 December 2017
Article by Murray Thornhill

Pre nuptial agreements were first made famous in the early two thousands by celebrities like Brad Pitt, Angelina Jolie and the Kardashians. Famously, it was rumoured that Brad Pitt and Angelina Jolie's pre-nuptial agreement included an "adultery clause" where Angelina Jolie allegedly got primary custody of the children if Brad Pitt was to ever stray while Nicole Kidman and Keith Urban's pre-nuptial agreement allegedly includes a clause that absolves Nicole Kidman of any financial responsibility if Keith Urban were to ever use illegal drugs or drink to excess.

So are pre-nuptial agreements still a relationship insurance that policy people should consider? Absolutely! But, unfortunately for Mr Kennedy in the case of Thorne v Kennedy [2017] HCA 49, a little further thought into the circumstances surrounding the entry into the pre-nuptial agreement with Ms Thorne may have assisted him. On 8 November 2017, the High Court unanimously allowed an appeal from the Full Court of the Family Court of Australia by holding that the two financial agreements, a pre-nuptial agreement and post-nuptial agreement entered into by Mr Kennedy with Ms Thorne, should be set aside. While the facts of this case may not be of celebrity status, they are important for anyone who is entering a financial agreement to consider.

The story of this romance began in 2006 when Ms Thorne and Mr Kennedy met on the internet. At the time the parties met, Ms Thorne was 36 years old, living in the Middle East with no substantial assets. While, Mr Kennedy was 67 years old, living in Australia with assets worth between $18 – $24 million. He had 3 adult children.

In true whirlwind romance style, shortly after the parties met online, Mr Kennedy bought Ms Thorne expensive jewellery and travelled to meet Ms Thorne on several occasions including taking her on an extended holiday around Europe at which time he met her family. Perhaps in a little more of a modern day twist to the classic Cinderella style story, Mr Kennedy told Ms Thorne he would marry her but said at the same time he also said "you will have to sign paper. My money is for my children."1

Seven months after the parties met online, in February 2007, Ms Thorne moved to Australia to live in Mr Kennedy's penthouse with the intention of getting married on 30 September 2007. Despite returning back to Australia with Ms Thorne in February, it was not until early August that Mr Kennedy instructed a solicitor to prepare a pre-nuptial agreement which it appears that Ms Thorne was not aware this was occurring.

Eleven days before the parties were due to get married; while other brides would be putting the final touches on their seating plans, Mr Kennedy had other ideas. Mr Kennedy told Ms Thorne they were going to see solicitors about signing an agreement. When Ms Thorne asked Mr Kennedy whether she was required to sign the agreement, Mr Kennedy told Ms Thorne that if she did not sign the agreement the wedding would not go ahead. Quite the romantic isn't he?

By 20 September 2007, "Ms Thorne's parents and sister had been flown to Australia from Eastern Europe and accommodated for the wedding by Mr Kennedy. Guests had been invited to the wedding. Ms Thorne's dress had been made. The wedding reception had been booked." Any bride could imagine the position that Ms Thorne was in at that time.

On 20 September 2007 when Mr Kennedy took Ms Thorne and her sister to see an independent solicitor ("Ms Harrison"), this was the first time that Ms Thorne had become aware of the contents of the pre-nuptial agreement ("the agreement") that Mr Kennedy had prepared. Before you think that it was kind of Mr Kennedy to take Ms Thorne to see a solicitor to get advice about the agreement, think again. It is a requirement that both parties entering into a financial agreement receive independent legal advice about the effect of the financial agreement on their rights, and the advantages and disadvantages of the financial agreement to that party of entering into the agreement.

On 21 September 2007, Ms Harrison sent written advice to Ms Thorne, in which Ms Harrison said "I hold significant concerns that you are only signing this Agreement so that your wedding will not be called off. I urge you to reconsider your position as this Agreement is drawn to protect [Mr Kennedy's] interests solely and in no way considers your interests."2

On 24 September 2007, Ms Harrison told Ms Thorne that "the agreement was the worst that she had ever seen...entirely inappropriate and that she told Ms Thorne that Ms Thorne should not sign it."3 Despite this clear advice, on 26 September 2007, four days before the parties were due to get married, Ms Thorne signed the agreement, which contained a recital requiring the parties to sign another agreement within 30 days. On 30 September 2007, the parties were married.

On 5 November 2007, Ms Thorne met with Ms Harrison again to get advice regarding the second agreement. Ms Harrison again advised Ms Thorne not to sign the second agreement and "Ms Harrison gained the impression that Ms Thorne was being pressured to sign the document."4 It is not surprising that she gained that impression! Ms Thorne again ignored Ms Harrison's advice and signed the agreement that day.

On 16 June 2011, less than 4 years after the parties were married Mr Kennedy signed a separation declaration. In August 2011, the parties' whirlwind romance ended when they separated without children. Pursuant to the agreement, as they were married for more than 3 years, Ms Thorne was entitled to a payment of $50,000 from Mr Kennedy. When you consider the fact that Mr Kennedy was reported to be worth between $18 – $24 million, and had "brought Ms Thorne to Australia promising to look after her like "a queen"5, this payment does not seem fair at all.

Ms Thorne commenced proceedings in April 2012 seeking to set aside the two agreements, an adjustment of property order of $1.1 million and a lump sum spousal maintenance order of $104,000. In May 2014, Mr Kennedy died during the trial at which time two of his adult children were substituted as a party in proceedings. In 2015, the Primary Judge set aside both agreements on the basis that there was duress and undue influence.

In a nutshell, the High Court held that Ms Thorne felt she had no other choice and was powerless to act in any way other than to sign the agreement due to the fact that "she was in Australia only in furtherance of their relationship. She 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."6

After the Primary Judge handed down her decision in 2015, Mr Kennedy's representatives successfully appealed to the Full Court of the Family Court of Australia. Ms Thorne then successfully appealed to the High Court of Australia where it was unanimously found that the agreements should be set aside for unconscionable conduct and a majority of the High Court (5 judges) held that Mr Kennedy had exercised undue influence over Ms Thorne.

So why does this matter? Well, if you are intending to enter a pre-nuptial agreement or post-nuptial agreement or binding financial agreement of any nature, it will be helpful to keep in mind the factors the High Court referred to while considering the existence of undue influence (at paragraph 60):

  1. Whether the agreement was offered on a basis that it was not subject to negotiation;
  2. The emotional circumstances in which the agreement was entered including any explicit or implicit threat to end a marriage or to end an engagement;
  3. Whether there was any time for careful reflection;
  4. The nature of the parties' relationship;
  5. The relative financial positions of the parties; and
  6. The independent advice that was received and whether there was time to reflect on that advice.

In reality these factors are applicable in more areas of law than just family law; undue influence is applicable to all areas of law, which is part of the reason that this is a landmark judgment. If you still want to "holla we want pre nup" then be sensible, get legal advice and listen to the legal advice, which has always been the case when entering financial agreements.

This judgment is not a "death knell" for pre-nuptial agreements and it is not going to "open the floodgates" as has been reported by a number of commentators, it is simply a timely reminder to all to take the requisite care when preparing or entering a binding financial agreement or any agreement for that matter. One of the High Court Judges, Nettle J summarised a logical view of Ms Thorne's position well by saying that "in the scheme of things, it can hardly be supposed that a young woman in Ms Thorne's position would be persuaded to abandon her life abroad and travel halfway around the world to bind herself to a sexagenarian if, at the outset of the relationship, she had been made aware of the enormity of the arrangement that was proposed." 7

Do you really think Ms Thorne would have let him put a ring on it by signing the pre-nuptial agreement if she clearly understood what she was getting herself into and if she hadn't almost entirely abandoned her life to travel to Australia to marry Mr Kennedy?

I don't, neither does the High Court of Australia.

Footnotes

1Thorne v Kennedy [2015] FCCA 484 at [91].

2 Thorne v Kennedy [2017] HCA 49 at [9].

3 Thorne v Kennedy [2017] HCA 49 at [12].

4Thorne v Kennedy [2017] HCA 49 at [14].

5 Thorne v Kennedy [2017] HCA 49 at [122]

6 Thorne v Kennedy [2015] FCCA 484 at [91].

7 Thorne v Kennedy [2017] HCA 49 at [75].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Murray Thornhill
 
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