A recently reported case from the Australian High Court (Thorne and Kennedy) has attracted debate in the UK due to the wider considerations applied when ruling that a pre-nuptial agreement should be set aside.
Pre and post nuptial agreements have legislative effect in Australia, unlike in the UK where to date the presence of an agreement is one of the factors to be taken into account when determining a financial remedy application.
Under Australian Law pre-nuptial agreements can be set aside under principles of either contract law (duress or undue influence) or according to an equitable doctrine of “unconscionable conduct” which means that one party is under a “special disadvantage” from making an agreement in their own interests.
In Thorne and Kennedy the wife (Ms Thorne) aged 36 and of Middle East origin married Mr Kennedy (67 and Australian). 11 days before the wedding was due to take place, the parties entered into a pre-nuptial agreement . This was subsequently ratified by a post nuptial agreement following the wedding having taken place.
The terms of the agreement were in short that Mr Kennedy’s entire wealth would be ring fenced for his adult children. Ms Thorne was advised against signing the agreement by her lawyer both as to the pre-nup and as to the ensuing post nuptial agreement.
Notwithstanding what was understood to be extensive legal advice Ms Thorne decided to sign the agreement. Mr Kennedy had reportedly and repeatedly informed Ms Thorne in no uncertain terms that if the agreement wasn’t signed then the wedding would not go ahead. Ms Thorne apparently refused to countenance that their marriage would fail and was solely concerned about being protected if Mr Kennedy pre-deceased her. Unfortunately however for Ms Thorne events did not work out that way and the parties went on to separate after only 4 years of marriage. Following separetion Mr Kennedy sought to uphold the terms of the mirror pre and post nuptial agreements.
The Australian Courts debated the principles upon which the agreement could or should be set aside or upheld. After much debate as the case made its way to the High Court in Australia, the decision was taken that the wife was under pressure within the relationship and that wider considerations should apply and notwithstanding the independent legal advice Ms Thorne obtained and the fact that she chose to go ahead and sign the agreement the High Court took the view that her decision to sign was not a true “free choice”. This was on the basis that had she not signed the agreement then the marriage would not have taken place and her ability to remain in Australia may have been in question. The Court therefore interpreted the concept of “undue influence” in a holistic sense rather than a narrow interpretation as set out in previous case law.
In English Law pre-nuptial agreements are in any event not prima facie legally binding and English Courts have a wider scope to determine whether agreements are “fair”. In this case the agreement may have been set aside perhaps on the basis that it failed to meet Ms Thorne’s needs and as such offended the S.25 principles as set out in the Matrimonial Causes Act. The relevance perhaps is that as agreements continue to be increasingly recognised by English Courts then it is important to explore the reasons for wanting to enter into an agreement and for the protection of both parties to try to ensure that proper consideration is given to interests of fairness and balancing free will as against structuring agreements so as to provide sufficient protection.
Such consideration is not only so the terms of the agreement contain sufficient provision to guard against offending the existing principles of “need” etc but also considering any power imbalance between the parties and at least recording that these have been considered so that agreements have the best chance of being upheld.
Having difficult conversations with parties whether they are the “financially weaker” or the “financially stronger” one is important prior to the agreement being entered into . It is also importance to ensure that the agreement is updated at various intervals with the provisions for review being properly contained within the agreement.
Pre-nuptial agreements are a valid and worthwhile method of protecting pre-acquired wealth, business interests and inheritance. Providing that they are entered into properly with each party having separate independent legal advice, full financial disclosure being provided and clear provisions for review then they are the single more effective method of ring fencing “separate property” in a jurisdiction which, whilst shifting away perhaps from the Joint Life maintenance culture as a result of recent decisions of the Higher Courts , remains one of the most generous in the world for divorcing spouses.
For further information on pre and post nuptial agreements contact me at email@example.com.