By Hugo Prescott, Lawyer
While we appreciate that most people aren’t interested in reading articles about Court cases (which is fair enough!), we feel that the recent High Court decision in Thorne v Kennedy  HCA 49 might just be an exception. This case teaches us some important lessons about the validity of ‘Pre/Post Nuptial Agreements’ (a.k.a. Binding Financial Agreements) but also provides us with a timely reminder about when and where the improper exercise of ‘power’ and ‘influence’ might invalidate a commercial contract.
Thorne v Kennedy had all the hallmarks of a classic love story: boy (a 67 year old Australian man, with assets worth between $18m - $24m) meets (online) a girl (a 36 year old woman of Eastern European descent, living in the Middle East, with no substantial assets) - boy and girl fall in love – girl moves to Australia to be with boy – boy and girl get married. Unfortunately, this story didn’t quite play out like it might have were it a film starring Hugh Grant & Julia Roberts, for two key reasons.
The first reason is that the parties separated and filed for divorce after less than 4 years of marriage, leaving no children of their own.
The second reason, being that which makes this case so interesting, is that Mr Kennedy (the boy) and Ms Thorne (the girl) entered into 2 agreements, being shortly before and shortly after the wedding– i.e. Binding Financial Agreements (BFAs). The purpose of a BFA is to provide certainty as to how marital assets should be distributed in the event of the breakdown of marriage. At best, a BFA can negate the prospect of a messy divorce proceeding and help the parties move swiftly through a difficult time. At worst, it can result in years of protracted and costly Court battles – just like what happened here.
In this case, the BFAs provided that, in the event that the parties separated, Ms Thorne would be entitled to a mere $50,000. To put it in context, this represent somewhere between .21% and .28% of Mr Kennedy’s net worth – a tiny fraction of his considerable wealth.
Following their separation and divorce, Ms Thorne issued proceedings against Mr Kennedy, by which she sought for the BFAs to be set aside on the basis that she had signed the BFAs as a result of ‘duress’, ‘undue influence’ and/or ‘unconscionable conduct’.
To that end, it is important to note:
- that Ms Thorne had ‘packed up’ her life and relocated to Australia for Mr Kennedy – a country where she knew essentially no-one, save for her fiancé;
- that Ms Thorne’s grasp of English was, at best, limited;
- that Ms Thorne was first shown the BFA just 2 weeks before the wedding (by which time her family, who lived overseas, had already flown to Australia for the wedding);
- the cultural pressure placed on Ms Thorne to marry;
- Ms Thorne’s age (36), which is relevant insofar that the marriage quite potentially presented her with her last opportunity to begin a family; and
- that despite Ms Thorne being advised by a lawyer that it was the “worst agreement that [the lawyer] had ever seen”, Ms Thorne nevertheless signed the BFA.
Ultimately, the High Court found in favour of Ms Thorne. In doing so, it held that Ms Thorne was essentially ‘powerless’ to refuse Mr Kennedy’s demand that she sign the BFAs and that he abused the ‘power’ and ‘influence’ which he held over Ms Thorne.
While this is strictly a ‘family law’ matter, it nevertheless provides us with a reminder as to the importance of not taking ‘special disadvantage’ of someone in the course of contractual negotiations. That is, if one party is of a particular disadvantage (i.e. a less than ideal grasp of the English language), then it might ultimately be the case that such agreement is invalid and therefore unenforceable.
Should you be a party to a BFA, or should you have any concerns in relation to one’s capacity to enter into a commercial contract, then please let us know.
At Law Squared, we partner with passionate entrepreneurs and businesses who need our technical help and expertise. We’d love to have a chat with you, so feel free to drop us an email firstname.lastname@example.org
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