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Thorne v Kennedy: High Court of Australia confirms the laws of contract and equity underpin pre-nuptial and post-nuptial financial agreements.
In a recent Australian Bar Review article, Lance Rundle of Central Queensland University explores the context in which equitable intervention, namely duress, undue influence and unconscionable conduct, were considered and applied by the High Court of Australia in the decision of Thorne v Kennedy. Furthermore, he analyses the impact of the decision for legal practitioners and parties when negotiating, drafting and signing a family law financial agreement.
The decision of the High Court of Australia in Thorne v Kennedy has created a greater awareness that equity may intervene to overturn a financial agreement when there is a lack of genuine consent, in circumstances where consent is vitiated by duress, undue influence or unconscionable conduct.
The judgment is a landmark decision as the High Court held the relationship of fiancé and fiancée is no longer one of presumed undue influence. Where undue influence is alleged to vitiate consent resulting in a financial agreement such as a prenuptial agreement, an applicant must establish actual undue influence.
A key message this article argues, is that in addition to adhering to the drafting requirements of the Family Law Act, complying with the principles of contract and equity law in a family law financial agreement are as important as compliance with the principles of contract and equity law in a commercial agreement.
Should the Family Court of Australia Full Court (FamCAFC) have set aside the financial agreements on the grounds of undue influence and unconscionable conduct?
In the case of Thorne v Kennedy, the appellant and respondent met online and married soon after, with the appellant signing pre-nuptial and post-nuptial agreements (financial agreements) limiting claim to any property settlement to $50,000 after three or more years of marriage.
The pre-nuptial agreement was signed at respondent's insistence in circumstances in which the appellant was given legal advice that the agreement was inappropriate.
Federal Circuit Court of Australia (FCCA) set aside the financial agreements on grounds of duress, undue influence or unconscionable conduct, finding that circumstances led the appellant to believe she had no choice.
The FamCAFC allowed the respondent's appeal and concluded that financial agreements were not vitiated by duress, undue influence, or unconscionable conduct.
However, in the appeal to the High Court of Australia the decision of Thorne v Kennedy set aside two financial agreements, an agreement before marriage and an agreement after marriage, on the basis they were voidable pursuant to s 90K of the Family Law Act 1975 (Cth) (‘Family Law Act’).
In addition, the High Court confirmed the financial effect of the terms of a financial agreement are within the purview of the court and where such terms are considered not fair and reasonable, may give rise to a special disability and the intervention of equity due to unconscionable conduct.
Australian Bar Review and is produced under the auspices of the Australian Bar Association and provides a forum for the scholarly discussion of current issues in legal doctrine and procedure throughout Australia.
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