Pre-Nuptial agreement can be overturned under duress, a High Court decision
The High Court of Australia handed down a decision in the matter of Thorne & Kennedy (2017) HCA 49 that could have significant consequences to current Binding Financial Agreements and new Agreements between parties.
The High Court held that two almost identical agreements could be set aside for unconscionable conduct, and the majority of the Court agreed that the agreements could further be set aside for undue influence. The agreements in question are a pre-nuptial agreement and a post-nuptial agreement made under the Family Law Act 1975.
What does this mean to you and me?
It means that your prenup can be set aside if not drafted with a level of formality that ensures that it is enforceable! It means that you have to be very careful when you enter into a Financial Agreement.
The facts of this case
In this case, the High Court granted the wife special leave to appeal a decision from the Full Court of the Family Court of Australia. The couple met online. The wife, then aged 36 lived overseas and had no substantial assets. The husband, then aged 67 was divorced with 3 adult children. He was a property developer with assets worth over $18 million. Shortly after meeting, the “wife” was told that his money was for his children and that she will have to sign papers if they get married.
Seven months after they met and 11 days before the wedding, she was taken to solicitors to sign papers. She was told that if she doesn’t sign the papers, the wedding would not go ahead. An independent solicitor advised her that the terms of the agreement solely protected the husband’s interests and advised her not to sign the agreement. The wife’s English was very poor, and she did not understand the lawyer’s advice properly. She further relied on the husband for everything and believed she had no choice but to enter the agreement. She signed the document and in terms of this agreement also signed a second agreement after they got married. The agreements were substantially identical.
Four years later the couple separated and the wife sought an order setting aside the property agreements. She further applied for a property adjustment order and a lump sum spousal maintenance order. One of the issues the court had to decide on was whether the agreements were voidable due to “duress, undue influence or unconscionable conduct”. The Full Court concluded that the agreements should not be set aside.
The wife, however, applied for and was granted, special leave to appeal this decision. In essence, the High Court agreed that the agreements should be set aside. The Federal Circuit Court must still determine her application for the property adjustment and the lump sum maintenance orders.
What should we learn from this decision?
You need to be prepared and seek specialized family law advice before entering into and signing a Financial Agreement. Failure to do so can have significant consequences when your relationship breaks down.
Disclaimer : This article provides basic information only and is not a substitute for a professional or legal advice. It is prudent to obtain legal advice from a family lawyer.