Elena Leonardos Lawyer Adelaide Legal Solutions Sophie Gauvin Lawyer Adelaide Legal Solutions
Blog, Case Studiesby Elena Leonardos

 

Lessons I have learned from the landmark case of Thorne v Kennedy about protecting assets and families.

The topic of Binding Financial Agreements makes people squirm. It feels formal and unromantic. It is almost like a jinx to love or stigma on a new relationship.

Some of us think with our heads and others with our hearts. If you are really lucky you will be able to think with both. In love, I find myself torn between my head and my heart.

BUT…. protecting your assets and your family are number one on the list of priorities for many people. Often, they do not know how to do this or where to start. The best way to protect your assets is to talk to a lawyer about a Binding Financial Agreement (BFA). Another BUT… BFA’s are expensive, tricky and at times a risky document. Despite the red flags, BFA’s are an essential investment into protection of your assets, family and future.

A BFA, what is it?

A BFA is a private contract between a couple, including same-sex partners that outlines how their property, assets, superannuation and liabilities will be divided if they separate. They can be drafted at any stage including the end of a relationship. There are a few types of BFAs, entered before co-habitation (prenuptial agreement), during a relationship (cohabitation agreement), or when a relationship ends (postnuptial agreement).

In Thorne v Kennedy [2017] HCA 49, the High Court of Australia provided valuable insights into the enforceability of BFAs in the context of marriage and the protection they offer to parties, particularly in blended families. This case shows the importance of fairness, equity, and the absence of undue influence when entering into BFAs. The relevant sections of the Family Law Act do not speak to fairness but this case certainly does. Families need to keep this in mind during discussions a BFA with their lawyer.

 

Thorne v Kennedy

Ms Thorne, an Eastern European woman, moved to Australia to marry Mr Kennedy, an older Australian/Greek property developer. Mr Kennedy insisted on a prenuptial agreement, to protect his considerable assets, amassed prior to the marriage. Ms Thorne, who had minimal assets and limited English, agreed to the BFA, despite receiving legal advice against it. Eight years into the marriage, significant disputes arose, she sought to set aside the BFA.

Key Issues

  1. Pressure and Influence: Ms Thorne claimed she signed the BFA under significant pressure, fearing the termination of the engagement and subsequent return to her home country.
  2. Legal Advice: Ms Thorne received legal advice that the agreement was “entirely inappropriate” yet proceeded due to perceived coercion and lack of alternatives.
  3. Substantive Injustice: The terms of the BFA heavily favoured Mr Kennedy, leading to substantive unfairness against Ms Thorne.

Court’s Findings

The High Court found:

  1. Duress and Undue Influence: Ms Thorne signed the BFA under duress and undue influence from Mr Kennedy, making the agreement unenforceable.
  2. Unconscionable Conduct: Mr Kennedy’s conduct in procuring the BFA amounted to unconscionable conduct given her circumstances.
  3. Legal Context: The legal advice Ms Thorne received, although clear, did not alleviate the undue influence upon her.

Implications for Blended Families

The Thorne v Kennedy case highlights critical considerations for entering into BFAs within blended families:

  1. Genuine Agreement: Both parties must enter into the agreement freely, without coercion or undue influence.
  2. Fair Legal Advice: Independent legal advice is crucial and must be genuinely considered by the party receiving it.
  3. Substantive Fairness: The terms of the BFA should be fair and equitable, ensuring that no party is disproportionately disadvantaged.

Case Application: Blended Families

Consider a blended family where both parties, Alex and Jamie, each have two children from their previous marriages. They decide to enter into a BFA to protect their respective assets and secure their children’s financial futures.

Objectives of the Agreement

  1. Protection of Assets: To safeguard individual assets acquired before the relationship, ensuring they are preserved for the original owner’s children.
  2. Clarification of Financial Responsibilities: To lay out the terms for shared and individual financial responsibilities, including household expenses and child support.
  3. Avoidance of Disputes: To minimise potential conflicts and legal disputes in the event of separation or divorce by having clear, legally binding arrangements.
  4. Provision for Shared Assets: To make provisions for jointly acquired assets during the relationship, outlining how they would be divided.

Key Provisions in Alex and Jamie’s BFA

  1. Asset Preservation:
    • Alex’s business remains solely his property, to transfer to his children in the future.
    • Jamie’s inheritance is for her children.
  2. Financial Responsibilities:
    • Both parties agree to contribute equally to household expenses.
    • Specific child support arrangements for each party’s children from previous marriages are documented.
  3. Jointly Acquired Assets:
    • Any property or significant assets acquired during the relationship will be shared 50/50.
    • Clear delineation of how jointly acquired assets would be divided in the event of separation.
  4. Future Amendments:
    • The BFA includes provisions for future amendments, accommodating any changes in circumstances, such as additional joint investments or changes in financial status.

Compliance with Thorne v Kennedy

To avoid issues similar to Thorne v Kennedy:

  1. Independent Legal Advice: Both Alex and Jamie must receive independent legal advice from different solicitors, ensuring they fully understand the BFA’s implications.
  2. Voluntary Agreement: The agreement must be entered into voluntarily, without any undue influence or pressure.
  3. Fair and Equitable Terms: The terms must be fair, ensuring neither party is unduly advantaged or disadvantaged.

Outcome

By entering into a well-structured BFA that adheres to the principles highlighted in Thorne v Kennedy, Alex and Jamie can achieve:

  1. Peace of Mind: Both parties gained peace of mind knowing their pre-existing assets were protected and preserved for their children from previous relationships.
  2. Transparency: The clear and transparent terms of the BFA helped prevent misunderstandings and potential future conflicts regarding financial matters.
  3. Fair and Equitable Distribution: The agreement ensured that any jointly acquired assets would be fairly divided, reflecting their combined efforts during the relationship.
  4. Legal Safeguards: The legal enforceability of the BFA provided a robust framework to handle any financial disputes, should they arise.

Conclusion

The Thorne v Kennedy case provides a valuable benchmark for drafting Binding Financial Agreements, particularly within blended families. By ensuring the absence of undue influence, providing fair and independent legal advice, and maintaining equitable terms, BFAs can be a safeguard  protection. For blended families like Alex and Jamie’s, this approach provides financial security and fosters harmony. It also encourages wealth creation because shared joint ventures can be divided fairly in the event that separation becomes necessary.

Do you still have questions? Make an appointment, we can help

At Adelaide Legal Solutions, we are committed to providing comprehensive legal advice tailored to your family situation. No family is the same, we all have unique complexities.  If you are considering a Binding Financial Agreement, our team and Elena are here to help.

Contact us today to schedule a consultation and explore how we can assist you.

  • Email: info@alslaw.com.au
  • Phone: (08) 8312 6440
  • Office Address: 30a Halifax Street, Adelaide, SA 5000

Let us guide you through this important process, ensuring peace of mind and security for your family.