Prenups on shaky ground after High Court decision
Prenuptial agreements appear to be on shaky legal ground after a recent landmark decision by the High Court of Australia.
Woman forced to sign prenup shortly before wedding
The case Thorne v Kennedy  HCA 49 centred on a penniless eastern European woman who signed a prenup – or “binding financial agreement” to give it the legal name – on the eve of her marriage to a wealthy Australian property developer.
The couple had met through a website that offered potential brides. Seven months after the meeting, she moved to Australia to marry the man, who was twice her age and was worth about $24 million.
But just before the wedding, the man – given the pseudonym “Mr Kennedy” by the court – told her, “Ms Thorne”, that she would have to sign a pre-nuptial agreement. He said his money was for his three adult children, and if she didn’t sign the wedding was off.
Speaking little English and with no other support in Australia, Ms Thorne signed the agreement that would entitle her to nothing if the marriage lasted less than three years, and just $50,000 if it lasted more than three years.
Financial agreements are covered by sections 90B to 90KA of the Family Law Act. As required by law, Ms Thorne had received independent legal advice before signing. That lawyer told her it was a “terrible” agreement and advised her not to sign it. But she felt she had no choice and signed.
Woman seeks to have prenup overturned after separation
Four months after the wedding the couple separated. Three years later the marriage was over. She took him to court seeking that the agreement be overturned and that she be awarded a settlement of $1.24 million.
Mr Kennedy died, but his estate, with two of his children as executors, continued fighting Ms Thorne’s claim for a bigger share of his wealth. The Federal Court found in her favour on the basis that the prenup was conducted under duress.
The estate appealed to the Full Court of the Family Court, where it won. She appealed, and the case went to the High Court.
Circumstances when court may overturn a prenuptial agreement
Section 90K of the Family Law Act deals with circumstances in which court may set aside a financial agreement. One such circumstance is when a party to the agreement “engaged in conduct that was, in all the circumstances, unconscionable”.
The High Court decided that the financial agreement should indeed be set aside for unconscionable conduct, as Ms Thorne had signed it under duress, putting her at a distinct disadvantage.
It was that duress that made the pre-nuptial agreement in breach of the law in the High Court’s eyes.
Law requires prenuptial agreements to be fair
In legal thinking, a prenuptial agreement is a contract between individuals and therefore comes under contract law.
The High Court decision shows that such agreements still have to be fair and can’t just be imposed on the weaker party. The decision makes the whole notion of a prenup shaky. It also demonstrates the need for expert legal advice before settling on such an agreement.