06 Mar Sign the pre-nup or no wedding: part 2 – Sacha Mastras
If you keep up to date with our blogs, you might recall our previous blog on the matter of Thorne v Kennedy. This case involved two parties who met online in 2006 when the Wife was living in Romania. The Wife was aged 36 years, spoke very little English, and had no children or assets of any significance. The Husband, on the other hand, was a divorced 67 year old developer who had adult children and net assets of somewhere between $18 million and $24 million.
About 10 days before their wedding, the Husband approached his future bride with a Binding Financial Agreement (more commonly known as a ‘pre-nup’) and stated that he would cancel the wedding if she did not sign. Despite obtaining legal advice that the agreement was “terrible” for the Wife, she signed the documents because she was in love, had family who had travelled to Australia for the upcoming wedding and did not want the wedding to be called off.
This matter was appealed to the High Court. The Wife argued that the Binding Financial Agreements should be invalid because there was a power imbalance between her and the Husband and she would have suffered from the Husband’s ultimatum of a cancelled wedding had she not signed. The Husband argued that the Wife willingly signed the agreement after obtaining independent legal advice and that she was well aware of the terms and conditions of the agreement if the marriage ended.
The High Court agreed that the Wife was powerless in that she had no ability to negotiate on a level playing field with the Husband and felt that she had no choice but to sign the agreements as they were presented to her, despite the legal advice she received. The circumstances of the Wife’s isolation in Australia, the urgency and short time frame in which the documents were presented to her, the pressure of the upcoming wedding and the threat that the wedding would not go ahead if she did not sign the agreement, were all considered.
The High Court unanimously struck down the Binding Financial Agreements and determined that the agreements should be set aside on the basis of the Wife being put under such pressure to sign the agreement (undue influence) and that the Husband took advantage of the Wife’s disadvantages (unconscionable conduct) such as her language barrier, her isolation in Australia and the ultimatum that the relationship would end if she did not sign.
This case highlights the risks that are involved in parties entering into Binding Financial Agreements without proper consideration and where there may be pressure as to timeframes and ultimatums if the agreement is not entered into. Binding Financial Agreements are complex and, as the outcome in Thorne v Kennedy demonstrates, must be treated with caution.
Part 1 and a more detailed background of this case can be found in our earlier blog here: sign the pre-nup or no wedding: part 1