Binding Financial Agreements and the High Court Decision in Kennedy

The significance of Thorne v Kennedy

  1. Thorne and Kennedy, in our opinion does not mark the end of BFAs as some commentators have argued.
  2. Neither does the case introduce a “justice and equity” or fairness test to BFAs.
  3. However, the case does:
    1. Sound yet another warning there are major risks of a BFA being set aside if it is executed too close to a wedding or significant event;
    2. Establish that the facts surrounding the execution of a BFA can lead to a conclusion that a party was powerless in the process; and
    3. Whilst the Court recognised that BFAs by their very nature will be more favourable to one party an unfair provision for a party in a BFA may in itself establish undue influence and unconscionable conduct which if established would lead to a BFA being set aside.

The Facts of the case are as follows:

The recent High Court case of Thorne v Kennedy
The High Court case of Thorne v Kennedy [2017] HCA 49 was delivered on 8 November 2017.

The Facts

  • The parties met over the internet in 2006. At the time, Ms Thorne, who was an Eastern European woman, was living in the Middle East. She was 36 years old. She had no substantial assets. Mr Kennedy was a 67-year-old Greek Australian property developer. He had assets worth between $18 million and $24 million. He was divorced with three adult children.
  • Ms Thorne’s profile on the website on which they met described her as a single woman with no children, of the Greek Orthodox religion, who spoke a little English and Greek. She shared the same religion with Mr Kennedy and generally conversed with him in Greek. Mr Kennedy travelled overseas to meet Ms Thorne very shortly after meeting her online. He told her that if he liked her then he would marry her but that “you will have to sign paper. My money is for my children”[1].
  • The wedding between Ms Thorne and Mr Kennedy was set for 30 September 2007. Around 19 September 2007, Mr Kennedy told Ms Thorne that they were going to see solicitors about the signing of an agreement. Ms Thorne asked Mr Kennedy whether he required her to sign the agreement. He replied that if she did not sign it then the wedding would not go ahead.
  • On 20 September 2007, Mr Kennedy took Ms Thorne and her sister to see an independent solicitor, Ms Harrison, who was an accredited family law specialist. Mr Kennedy waited in the car outside. It was during this appointment that Ms Thorne first became aware of the contents of the agreement. By this time, Ms Thorne’s parents and sister had been flown to Australia from Eastern Europe and accommodated for the wedding by Mr Kennedy. Guests had been invited to the wedding. Ms Thorne’s dress had been made. The wedding reception had been booked.
  • Ms Thorne signed the pre-nuptial agreement 4 days before the wedding and a very similar post nuptial agreement shortly after the wedding.



Ms Thorne’s solicitor Ms Harrison advised her not to sign the BFA and that the BFA was “the Worst BFA I have ever seen.” The BFA provided as follows:

(1) The agreement provided for Ms Thorne to receive maintenance during the marriage of the greater of (i) $4,000 per month. Ms Harrison observed that the $4,000 per month contained no provision for increase and was a very poor provision from someone in Mr Kennedy’s circumstances.

(2) Ms Thorne would be permitted to live rent free in a penthouse located in the proposed development and her family would be permitted to live rent free in a unit located in that development.

(3) If Ms Thorne and Mr Kennedy separated within the first three years of marriage, with or without children, then Ms Thorne would get nothing. The rights described above would also cease.

(4) If Ms Thorne and Mr Kennedy separated after three years, without children, Mr Kennedy would only have an obligation to pay a single lump sum of $50,000 to Ms Thorne. Ms Harrison described this amount as “piteously small”.

(5) If Mr Kennedy died while they were living together and while they had not separated then the agreement provided that Ms Thorne would be entitled to (i) a penthouse in the proposed development or, if that were not possible, a unit she chose in the same city not exceeding a market value of $1.5 million; (ii) 40% of the net income of the management rights of the proposed development or $5,000 per month, indexed annually, whichever was the greater; and (iii) the Mercedes Benz car that was presently in her possession or a replacement vehicle of the same or higher value.

· Ms Harrison’s advice concluded as follows:

“I believe that you are under significant stress in the lead up to your wedding and that you have been put in a position where you must sign this Agreement regardless of its fairness so that your wedding can go ahead. I also understand from what you have told me that you are longing to have a child and you see your relationship with [Mr Kennedy] as the opportunity to fulfil what may well be a long- held desire. I hold significant concerns that you are only signing this Agreement so that your wedding will not be called off. I urge you to reconsider your position as this Agreement is drawn to protect [Mr Kennedy’s] interests solely and in no way considers your interests.”

· After four years the parties separated, and Mr Kennedy died during the subsequent legal proceedings. A single Judge (“the Primary Judge”) set aside the BFA. The case was appealed, and the Full Court of the Family Court re-instated the BFA. The High Court held that the decision of the Primary Judge was correct, and it set aside the BFA.

BFA set aside

At paragraph 47 the High Court approved of the Primary Judge’s reasoning as follows:
· The primary judge set out six matters which, in combination, led her to the conclusion that Ms Thorne had “no choice”[2] or was powerless[3]: (i) her lack of financial equality with Mr Kennedy; (ii) her lack of permanent status in Australia at the time; (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”[4] of her upcoming marriage. These six matters were the basis for the vivid description by the primary judge of Ms Thorne’s circumstances[5]:

“She was in Australia only in furtherance of their relationship. She had left behind her life and minimal possessions … She brought no assets of substance to the relationship. If the relationship ended, she would have nothing. No job, no visa, no home, no place, no community. The consequences of the relationship being at an end would have significant and serious consequences to Ms Thorne. She would not be entitled to remain in Australia and she had nothing to return to anywhere else in the world.

Every bargaining chip and every power was in Mr Kennedy’s hands. Either the document, as it was, was signed, or the relationship was at an end. The husband made that clear.”

· The high Court set aside the BFA on grounds of undue influence and unconscionable conduct. We note the following paragraphs of the decision

The primary judge was correct to consider the unfair and unreasonable terms of the pre-nuptial agreement and the post-nuptial agreement as matters relevant to her consideration of whether the agreements were vitiated. Of course, the nature of agreements of this type means that their terms will usually be more favourable, and sometimes much more favourable, for one party. However, despite the usual financial imbalance in agreements of that nature, it can be an indicium of undue influence if a pre-nuptial or post-nuptial agreement is signed despite being known to be grossly unreasonable even for agreements of this nature. In other words, what the Full Court rightly recognised as the significant gap between Ms Thorne’s understanding of Ms Harrison’s strong advice not to sign the “entirely inappropriate” agreement and Ms Thorne’s actions in signing the agreement was capable of being a circumstance relevant to whether an inference should be drawn of undue influence. [paragraph 56]

…Ms Thorne was labouring under a disadvantage… the disadvantage is not a mere difference in the bargaining power but requires an inability for a person to make a judgment as to his or her own best interests. The findings by the primary judge that Ms Thorne was subject to undue influence – powerless, with what she saw as no choice but to enter the agreements – point inevitably to the conclusion that she was subject to a special disadvantage in her entry into the agreements. [paragraph 64]