BFA's - Still a valid instrument? YES

A recent High Court decision, Thorne v Kennedy [2017], has caused a flutter among Family Law Commentators. The Court determined the issue of unconscionable conduct and undue influence and duress in regards to the signing of a Binding Financial Agreement (BFA). Media tag lines such as “Death Knell of Pre Nuptial agreements in Australia” and “Shockwaves [sent] through the Legal Community” have only served to create confusion and alarm in past and potential Family Law clients.

Rest assured that if you have a Binding Financial Agreement (commonly know as pre-nuptial or post-nuptial agreements) prepared under the Family Law Act 1975 entered into by you, recognising the principals of the Act and common sense common law, you are still protected.

The reason the decision of the High Court in Thorne v Kennedy has raised so many eyebrows is because it is the first of its kind.  Until now, Legal Practitioners weren’t sure how the Court would “interpret specific factual circumstances of a case” in a contested BFA Matter.

This case study highlights the fact that there is no requirement for Court approval of a BFA which means people can make agreements that are not necessarily “Fair” or “Just and Equitable” – however there are guidelines within the legislation that enables the Court to make determinations upon specific circumstances.

Most importantly, this case emphasises the fact that if you are considering or entering into a Financial Agreement you should contact a family lawyer to discuss your situation and get a full understanding of your rights and responsibilities.

In a nutshell, the facts of the case were;

  • The wife (37) came from overseas with very little English, no assets or future prospects other than marrying her husband-to-be (67).
  • The Husband was an Australian multimillionaire business man who had made it clear from the start of the relationship that his “money” was always going to go to his children in the event of his death.
  • Days prior to the wedding the Husband presented the wife with a BFA and stated that if it wasn’t signed the wedding was off.  That BFA has been quoted as being “the worst BFA ever seen”
  • The reason for the BFA being considered so awful was due to the fact that it left the wife-to-be with only $50,000 next to nothing compared to his multi million estate in the event the marriage ended or the husband-to-be died.
  • The wife received extensive and eloquent independent legal advice that the BFA was not in her favour and was strongly encouraged not to sign it.
  • Despite that advice, and similar advice 4 weeks later on a follow up BFA, the wife signed the documents.
  • The parties married and all went well, until it didn’t, and they separated.
  • The wife contested the BFA’s and sought a large property settlement and spousal maintenance.

Special factors in this case were that the Husband was in an exceptionally good financial position at all times and the wife was not.  At the time she signed the BFA she had come to Australia with no assets, little English and no likely future prospects of employment.

The case that was run on behalf of the wife was that the BFA’s needed to be overturned by the Court because they were signed under duress, under undue influence and as a result of the husband’s unconscionable conduct.

Had the wife been a savvy, financial woman with excellent English and a village of support around her, she may not have been successful in her application.

In this case, there were six particular aspects that had to be taken into account and which, in combination led to the conclusion that the wife was under duress and undue influence at the time to signing.

(i)         her lack of financial equality with Mr Kennedy;

(ii)         her lack of permanent status in Australia at the time ( she was on a tourist visa);

(iii)        her reliance on Mr Kennedy for all things;

(iv)        her emotional connectedness to their relationship and the prospect of motherhood;

(v)         her emotional preparation for marriage; and

(vi)        the "publicness “of her upcoming marriage

Further, there was the conclusion that in these factual circumstances, it was unconscientious for Mr Kennedy to procure or accept her assent.

Thus the BFA’s in this case were overturned.


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