If you are considering a binding financial agreement in Australia, or you already have one in place, the High Court decision in Thorne v Kennedy [2017] HCA 49 is one of the most important cases you need to understand. This landmark ruling reshaped the way courts assess the enforceability of prenuptial and postnuptial agreements, and it carries practical lessons for anyone looking to protect their assets through a BFA. Below, we cover the facts of the case, the key factors that can make or break a financial agreement, and what you can do to help ensure your BFA holds up.
The Facts Behind the Thorne v Kennedy Case
The case involved a couple who met online in 2006. Ms Thorne was a 36-year-old Eastern European woman living overseas with no substantial assets. Mr Kennedy was a 67-year-old Australian property developer with assets worth between $18 million and $24 million. After a brief courtship, Ms Thorne relocated to Australia in February 2007 to live with Mr Kennedy, with the couple planning to marry later that year.
Shortly after meeting Ms Thorne, Mr Kennedy made his intentions clear. He told her that if they married, she would need to sign a financial agreement and that his money was for his children. Approximately 11 days before the wedding, Mr Kennedy informed Ms Thorne they would be visiting solicitors to sign a binding financial agreement and told her that if she did not sign, the wedding would not proceed.
The following day, Mr Kennedy took Ms Thorne to obtain independent legal advice. This was the first time she became aware of the specific terms of the agreement. The solicitor who advised Ms Thorne described the provisions as extremely poor given Mr Kennedy’s wealth and told her it was the worst agreement she had ever seen. Under the terms of the agreement, if the parties separated within three years, Ms Thorne would receive nothing. If they separated after three years, she would receive a lump sum of just $50,000.
Despite this advice, Ms Thorne signed the agreement four days before the wedding. Her family had already travelled to Australia for the ceremony, and all wedding preparations had been made. She felt she had no choice. A second, substantially identical agreement was signed shortly after the marriage, again against legal advice. The couple separated in 2011, and Ms Thorne commenced proceedings in April 2012 to have both agreements set aside.
What Did the High Court Decide?
The High Court of Australia unanimously allowed Ms Thorne’s appeal on 8 November 2017, setting aside both the prenuptial and postnuptial agreements. All seven justices agreed that the agreements were the result of unconscionable conduct. A majority also found that the agreements were the product of undue influence. The Court did not find it necessary to make a final determination on whether the agreements were also vitiated by duress.
The trial judge had originally set aside both agreements, but the Full Court of the Family Court overturned that decision on appeal, concluding the agreements were binding. Ms Thorne then appealed to the High Court, which restored the trial judge’s orders and confirmed that the agreements should never have been enforced.
A critical aspect of the High Court’s reasoning was that the terms of the agreements were grossly unreasonable. The Court emphasised that while BFAs are often designed to favour one party over another, a court can still consider the unfairness of the terms when assessing whether an agreement was entered into freely. An agreement that is an extremely bad bargain for one party can itself be evidence of undue influence or unconscionable conduct, particularly when combined with other concerning circumstances.
Unconscionable Conduct
The High Court found that Mr Kennedy had unconscientiously taken advantage of Ms Thorne’s special disadvantage. Ms Thorne was in a foreign country with no family, no friends, no job, no permanent visa, and no financial resources of her own. She was entirely reliant on Mr Kennedy for her day-to-day life and her ability to remain in Australia. Justice Nettle specifically noted that Mr Kennedy had created this special disadvantage by bringing Ms Thorne to Australia, keeping her there with the expectation of marriage, and then presenting her with the agreement while refusing to marry her unless she signed on his terms.
This finding is significant because it demonstrates that unconscionable conduct does not require dishonesty or deliberate deceit. It can arise where one party simply takes advantage of a position of power over the other, even if the weaker party is aware of what they are signing. The Court made clear that Ms Thorne’s understanding of the terms and her choice to sign despite legal advice not to do so was not enough to save the agreement from being set aside.
Undue Influence
The majority of the High Court also held that the agreements were the result of actual undue influence. The Court identified several factors that can indicate whether a BFA was not entered into freely. These included whether the agreement was offered on a take-it-or-leave-it basis with no room for negotiation, the emotional circumstances surrounding the signing (including threats to end an engagement or marriage), whether there was sufficient time for careful reflection, the nature of the parties’ relationship and any inequalities between them, their relative financial positions, and the quality and timing of independent legal advice received.
The Court also noted that a significant gap between the legal advice a party receives and the party’s decision to sign regardless can itself support an inference of undue influence. Rather than showing that Ms Thorne made an informed choice, her decision to sign against strong legal advice demonstrated she was not exercising her free will. This is a crucial point, because it means that simply obtaining independent legal advice is not always sufficient to protect an agreement from challenge.
The Role of Independent Legal Advice in BFAs
One of the most talked-about aspects of the Thorne v Kennedy decision is the Court’s treatment of independent legal advice. Under the Family Law Act 1975 (Cth), both parties to a BFA must receive independent legal advice for the agreement to be binding. However, the High Court confirmed that meeting this technical requirement does not guarantee the agreement will be upheld.
In this case, Ms Thorne received clear and strong advice that the agreement was entirely inappropriate and that she should not sign it. She signed anyway because she felt she had no alternative. The High Court accepted that where one party is under such pressure that they cannot meaningfully act on the advice they receive, the provision of legal advice does not cure the underlying problem. This was a significant clarification for family law practitioners, as it highlighted that the process surrounding a BFA matters just as much as the technical requirements of the legislation.
Key Factors That Can Lead to a BFA Being Set Aside
The High Court’s decision provides a framework for understanding what courts will look at when deciding whether a BFA should be set aside. While every case will depend on its own facts, several recurring factors emerged from this decision that are worth understanding.
Timing of the Agreement
Agreements presented shortly before a wedding or other significant life event are particularly vulnerable to challenge. In Thorne v Kennedy, the agreement was presented just 11 days before the wedding and signed only four days before the ceremony. The closer the agreement is to the wedding date, the more likely a court is to find that one party was under emotional pressure to sign. Ideally, both parties should have months rather than weeks or days to consider the terms and seek advice.
Whether the Agreement Was Open to Negotiation
A BFA that is presented as a non-negotiable, take-it-or-leave-it proposition is much more likely to be set aside than one that was the product of genuine discussion. In this case, Mr Kennedy effectively told Ms Thorne she had to sign or there would be no wedding, leaving no meaningful opportunity for her to negotiate better terms. Courts are more likely to uphold agreements where both parties had input into the drafting process and where reasonable amendments were considered.
Inequality of Bargaining Power
A large disparity between the parties’ financial positions or personal resources can create an environment where one party is unable to freely negotiate or decline to sign. Ms Thorne had no assets, no family in Australia, no permanent visa, limited English, and was entirely dependent on Mr Kennedy. While financial inequality alone will not necessarily invalidate a BFA, it becomes a much more significant factor when combined with other elements such as pressure, limited time, or unfair terms.
Fairness of the Terms
The High Court made it clear that while BFAs are permitted to be unequal by their nature, an agreement with terms that are grossly unreasonable can contribute to a finding that it should be set aside. The fact that Ms Thorne would have received nothing if the couple separated within three years, and only $50,000 after three years despite Mr Kennedy holding $18 to $24 million in assets, was a relevant consideration. Courts do not expect BFAs to divide assets equally, but they do expect the terms to bear some reasonable relationship to the circumstances of the parties.
Time to Reflect on Legal Advice
Both parties need adequate time to receive legal advice and to think carefully about what the agreement means for them. Rushed processes where a party receives advice and signs within a matter of days undermine the reliability of the agreement. The High Court’s decision reinforces the importance of building in sufficient time between when legal advice is given and when the agreement is signed.
Does Thorne v Kennedy Mean BFAs Are No Longer Enforceable?
Some commentary following the decision suggested that Thorne v Kennedy signalled the end of binding financial agreements in Australia. This is not accurate. The High Court did not change the law relating to BFAs in any fundamental way. Rather, the decision reinforced existing legal principles around unconscionable conduct and undue influence as they apply to financial agreements under the Family Law Act 1975.
BFAs remain a valid and important tool for Australians who wish to protect their assets and define how property will be divided in the event of a relationship breakdown. What the case did do is underscore the importance of how those agreements are prepared, presented, and signed. A properly drafted BFA that is entered into voluntarily, with adequate time and genuine independent legal advice, and that contains terms which are not grossly unreasonable, is still very likely to be upheld by a court. The key takeaway is that the process is just as important as the document itself.
How to Help Protect Your BFA After Thorne v Kennedy
In light of the principles established in Thorne v Kennedy, there are several practical steps you can take to give your BFA the best chance of being enforceable.
Start the Process Early
Do not wait until a few weeks before your wedding to raise the subject of a financial agreement with your partner. The earlier the conversation begins, the more time both parties have to consider the terms, seek legal advice, and negotiate if necessary. Starting the process months in advance removes the kind of time pressure that was a central issue in Thorne v Kennedy, and it demonstrates to any future court that both parties had a genuine opportunity to engage with the agreement on their own terms.
Ensure Genuine Independent Legal Advice
Both parties must receive independent legal advice from separate solicitors, and this advice must be meaningful. It is not enough for a solicitor to simply read through the agreement and issue a certificate. Each party’s lawyer should explain the effect of the agreement, the rights the party is giving up, and the advantages and disadvantages of signing. Both parties should also have time after receiving this advice to consider their position before putting pen to paper.
Allow Room for Negotiation
Presenting a BFA as a non-negotiable document significantly increases the risk of it being set aside. Both parties should be encouraged to discuss the terms and propose amendments. Even small changes that reflect the other party’s input can demonstrate that the agreement was not simply imposed by the wealthier or more powerful party, and a collaborative approach to drafting will produce an agreement that is far more likely to be upheld.
Include Fair and Reasonable Provisions
While a BFA does not need to divide assets equally, the terms should not be grossly one-sided. Consider including reasonable provisions for the financially weaker party, particularly if the relationship lasts for a significant period or if children are born. As the High Court indicated, approaching the drafting of a BFA with a measure of generosity can actually strengthen its enforceability.
Make Full Financial Disclosure
Under section 90K of the Family Law Act 1975, a court can set aside a BFA if it was obtained by fraud, including non-disclosure of material financial matters. Both parties should make complete and transparent disclosure of all their assets, liabilities, income, and financial resources before the agreement is signed. This ensures that both parties enter the agreement with a full understanding of the financial landscape and removes a potential ground for challenge down the track.
Need Help With Your Binding Financial Agreement?
The Thorne v Kennedy decision made clear that the circumstances surrounding a BFA are just as important as the document itself. A fair, well-drafted agreement entered into voluntarily, with proper legal advice and adequate time for reflection, remains a powerful tool for protecting your financial interests.
As BFA lawyers in Australia, my law firm can help you with preparing, reviewing, or understanding your binding financial agreement. We offer transparent, fixed fee services and take the time to ensure the process is done properly. Contact our team today by calling 1300 529 888.
Frequently Asked Questions
What is a binding financial agreement?
A binding financial agreement, or BFA, is a legal contract made under Part VIIIA of the Family Law Act 1975 (Cth) that sets out how a couple’s assets, property, and financial resources will be divided if their relationship breaks down. BFAs can be entered into before, during, or after a marriage or de facto relationship. For a BFA to be enforceable, both parties must receive independent legal advice and the agreement must meet certain technical requirements.
Can a binding financial agreement be overturned in Australia?
Yes. Under section 90K of the Family Law Act 1975, a court can set aside a BFA on several grounds. These include fraud or non-disclosure of material financial information, unconscionable conduct, undue influence, duress, or where a significant change in circumstances has occurred that causes hardship to a child of the relationship. The Thorne v Kennedy decision is a leading example of a BFA being set aside for unconscionable conduct and undue influence.
Does getting independent legal advice guarantee my BFA will be enforced?
No. While independent legal advice is a mandatory requirement for a BFA to be binding under the Family Law Act, the High Court in Thorne v Kennedy confirmed that receiving legal advice alone does not guarantee enforceability. If circumstances show that a party was unable to meaningfully act on the advice due to pressure or vulnerability, a court may still set the agreement aside.
How far in advance should a BFA be signed before a wedding?
There is no specific timeframe set out in the legislation. However, the Thorne v Kennedy decision strongly suggests that agreements signed in the days or weeks immediately before a wedding are at greater risk of being challenged. Both parties should begin discussing and drafting the agreement months before any planned wedding, allowing adequate time for legal advice, negotiation, and careful reflection.
Is a prenup the same as a binding financial agreement?
In Australia, a prenuptial agreement (often called a prenup) is a type of binding financial agreement made before marriage under section 90B of the Family Law Act 1975. The term “prenup” is simply the colloquial name for a pre-marriage BFA. Postnuptial agreements, made during a marriage, fall under section 90C of the same Act. Both types must meet the same legal requirements to be considered binding.