Can a binding financial agreement be overturned?

When can a BFA be set aside? A review of Thorne and Kennedy [2017] High Court of Australia 49

Most family lawyers shy away from BFAs, and that is because they can be overturned even when you give them the utmost amount of consideration. In Thorne and Kennedy that is exactly what happened, a lawyer advised someone not to sign an agreement, they did it anyway and lucky for them the agreement was overturned in their favor.

Facts of the case the saw a BFA set aside

The facts of the case are as follows:

  • The parties met over the internet in 2006.
  • Ms Thorne, an Eastern European woman, was 36 years old and living in the Middle East.  She had no substantial assets. Mr Kennedy was a 67-year-old property developer, with assets worth between $18 million and $24 million.
  • Ms Thorne relocated to Australia in February 2007, roughly 7 months after meeting Mr Kennedy and in furtherance of the relationship. Their wedding was set for 30 September 2007.
  • On 19 September 2007, Mr Kennedy told Ms Thorne that they were going to see solicitors to sign an agreement and advised her that if she did not sign the agreement, the wedding would not proceed.  
  • The next day, Mr Kennedy took Ms Throne to see a different solicitor to obtain advice about the agreement. This was the first time that Ms Thorne had become aware of the contents of the agreement.
  • The solicitor advising Ms Thorne produced written advice, describing the provision for Ms Thorne under the agreement as ‘piteously small’ in light of Mr Kennedy’s significant wealth.
  • The solicitor’s advice concluded that it was evident that Ms Thorne was ‘under significant stress’ in the lead up to the wedding, and that Ms Thorne appeared to have been put in a position, where, in order for the wedding to proceed, the agreement was required to be signed, regardless of whether or not it was fair.
  • The solicitor also provided oral advice to the effect that this was the ‘worst agreement that she had ever seen’ and advised Ms Thorne against signing the agreement.
  • Ms Thorne signed the agreement four days prior to the wedding. Contrary to the solicitor’s advice, Ms Thorne signed another agreement, in similar terms, a short period after the wedding.

What are the issues the court considered in overturning the BFA?

The primary issue in this matter is the implications for parties entering into financial agreements, particularly when duress, undue influence and unconscionable conduct is present. 
To establish duress, the Court was required to determine whether Ms Thorne had any choice but to sign the agreement.

The initial decision that saw the BFA set aside

After the parties had separated, Ms Thorne was successful in the Federal Circuit Court for both agreements to be set aside.  The primary judge recognised Ms Thorne’s signed both agreements under duress so that the wedding would proceed.  Her Honour described Ms Thorne as being ‘powerless with no choice’ but to sign the agreement.  Ms Thorne’s application was successful, based on six key factors. These key factors were:

  1. Ms Thorne’s lack of financial equality with Mr Kennedy;
  2. Ms Thorne’s lack of permanent residency status in Australia at the time;
  3. Ms Thorne’s reliance on Mr Kennedy for all things;
  4. Ms Thorne’s emotional connectedness to her relationship with Mr Kennedy and the prospect of motherhood and a happy, married life;
  5. Ms Thorne’s emotional preparation;  and
  6. How public the upcoming marriage was.

The husband died during the first Court proceeding and his adult children continued the matter on appeal.

But they appealed the decision and…they won!

The husband appealed the decision, and the Full Court of the Family Court found in favor of the husband. The Full Court found that there had been no misrepresentations by Mr Kennedy regarding his financial position and that it was made clear that Ms Thorne would not receive any of his wealth upon separation.  
It was held that there was no duress or undue influence on Ms Thorne as she had no concern about what she would be able to receive upon separating. Further, it was held that there was no unconscionable conduct, as Mr Kennedy had not taken advantage of Ms Thorne.  
The Full Court considered these agreements to be both fair and reasonable, as Ms Thorne was aware, from the commencement of their relationship, that his wealth was for his three adult children and she had accepted this.

It didn’t stop there they appealed it all the way to the high court and the BFA got set aside

Finally, the High Court unanimously allowed Ms Thorne’s appeal.  It held that the agreements were voidable under section 90K of the Family Law Act, based on the grounds of unconscionable conduct and undue influence of the Husband.  
In regards to the unconscionable conduct, the High Court held that Mr Kennedy took advantage of Ms Thorne’s special disadvantage, which negatively affected her judgment as to her best interests.

Luke Cudmore

Principal Family Lawyer at Cudmore Legal Family Lawyers Brisbane Co. Luke is experienced in family law matters ranging from divorce to child custody. He is a skilled negotiator and strategist and fights zealously for his clients family law rights.