Binding Financial Agreements or Pre Nups

Should I enter into a Binding Financial Agreement (or Pre-Nup)?

The High Court of Australia has recently made a judgement on a case which has shocked the entire family law network.

On 8 August 2017, the High Court of Australia heard an appeal in the matter of Thorne v Kennedy HCA 49, in relation to the validity of a Binding Financial Agreement (BFA).

A BFA, also commonly referred to as pre-nuptial agreement, or pre-nup, is an agreement which outlines how a couple’s various assets and liabilities are going to be dealt with in the event their relationship breaks down. A BFA can be made between either married or de-facto couples and can be entered into either before, during, or after a marriage or relationship.

In the case of Thorne v Kennedy, the Court was required to consider the validity of a BFA which was entered into pursuant to the Family Law Act 1975.

The facts of the case involve:

  1. Ms Thorne and Mr Kennedy met over an internet social platform in or around 2006.
  2. Ms Thorne had nominal assets, whereas Mr Kennedy had a net worth of approximately $20 million at the time.
  3. When the parties met in person, Mr Kennedy advised Ms Thorne that if they were to get married, she would “have to sign a paper.”
  4. A few weeks prior to the wedding, Mr Kennedy advised Ms Thorne that he would be arranging for her to meet with a lawyer regarding the signing of an agreement. He further advised that the wedding would not go ahead if she did not sign the agreement.
  5. Ms Thorne received written advice which stated that the agreement was the “worst Financial Agreement” that the lawyer has ever seen. The lawyer further advised Ms Thorne not to sign the Agreement.
  6. Despite receiving the advice, Ms Thorne signed the agreement anyway.
  7. On 16 June 2011, the couple separated, and in accordance with the agreement, Ms Thorne was not entitled to anything.

Ms Thorne commenced proceedings to have the Agreement set aside. The Federal Circuit Court, at first instance, set aside the BFA. Mr Kennedy then appealed and the Full Court of the Family Court set aside the decision of the primary judge, and in essence agreed that the Financial Agreement entered into by Ms Thorne should be considered valid.  Ms Thorne then sought and was granted leave to Appeal to the High Court.

The High Court held that the BFA was voidable due to both undue influence and unconscionable conduct having regard to the circumstances and timing around which Ms Thorne entered into the BFA against her solicitors advice.

The matter has now been returned to the Federal Court to determine a ‘just & equitable’ property settlement between Ms Thorne and Mr Kennedy’s estate (noting that Mr Kennedy passed away in 2014).

is therefore important to keep in mind that a BFA can ultimately be challenged, and therefore may not be the best mechanism to protect your assets.

If you or your partner have already entered into a BFA or are considering entering into one, and would like to receive some advice, please contact Perth Family Lawyers at 9325 8675 today to discuss your matter.   

If you have separated from your spouse or de facto partner and they have proposed entering a BFA we would also urge you to obtain legal advice as often a post-separation BFA is proposed to permit a party to be absolved from their disclosure obligations or because the property settlement being proposed is not fair and equitable.

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