LawTalk Blog

Recent High Court decision and the value of Pre-Nups

High Court Thorne v Kennedy

Is it worth having a Pre-Nup; referred to as Binding Financial Agreement in Australia?

Our clients often ask this question and even lawyers are now asking it themselves, following the recent High Court decision of in Thorne v Kennedy [2017] HCA 49.

What happened in the Thorne v Kennedy case?

This case involved an Australian property developer husband who owned assets worth millions of dollars and a wife from overseas who spoke limited English and had no assets of her own when she entered the relationship.

The wife understood that the husband required her to sign a Binding Financial Agreement (“BFA”) protecting his assets for his children upon their marriage and her lawyer advised her not to sign the agreement. The BFA was presented to her only days before the wedding and she was told that the wedding would not go ahead if she did not sign it.

The Agreement gave the wife a single lump sum of $50,000 (CPI indexed) in the event of a separation, if they had been married for at least 3 years. She was also required to sign a similar Agreement after the parties’ marriage to confirm that the original Agreement continued to be in place.

After almost 4 years of marriage the parties separated. The wife was purportedly chatting in a hairdressing salon about her situation when, upon overhearing her conversation, another salon customer suggested they could put her in touch with a lawyer to get some advice.

"The husband passed away during the proceedings and his estate filed an appeal against the decision of the first court."

After obtaining that advice the wife filed proceedings in the Federal Circuit Court of Australia in Brisbane to set aside the original Agreements. That court made a decision in the wife’s favour and set aside the Binding Financial Agreements that she had signed.

The husband passed away during the proceedings and his estate filed an appeal against the decision of the first court.

The Family Court sitting in Brisbane then considered the matter and they found for the husband, confirming that the two Binding Financial Agreements were valid. The wife then appealed to the High Court of Australia who ultimately set aside the two Binding Financial Agreements.

Why were the Binding Financial Agreements set aside?

There were circumstances that led to the Binding Financial Agreements between these two parties being set aside. One of the reasons was the fact that the parties were due to marry only a matter of days after the initial Agreement was signed and also that the wife was to receive very little by way of the settlement detailed in the Agreement.

"... the court found that there was unconscionable conduct..."

As a result of all of the circumstances of the case, the court found that there was unconscionable conduct and undue influence upon the wife to sign the Agreements and they set them aside.

So are Pre-Nups (Binding Financial Agreements) worth it?

In our view the answer is still a resounding “YES”!

It is also now more important than ever that these agreements should be arranged well before the date of marriage or cohabitation wherever possible.It is worthwhile having a pre-nuptial type agreement prepared to protect your assets and entitlements from a claim by your partner in the event of a separation, as long as that agreement is properly prepared by a family lawyer who is an expert in that area and in the right circumstances.

The Family Law Act 1975 (as amended) allows married and de facto couples to enter into Binding Financial Agreements as follows:

  • Before marriage or cohabitation;
  • During marriage or cohabitation; and
  • After marriage or cohabitation.

The purpose of a Binding Financial Agreement is to enable the parties to record their agreement as to how their assets and resources will be divided if they separate in the future or where they have already separated, as well as maintenance that one party may have to pay to the other.

The agreements are designed to prevent either party from later deciding to make a claim against the assets of the other party upon their separation, or to claim additional assets if they have already separated, which they might otherwise be entitled to do under the Family Law Act.

"... if you want to protect your assets or entitlements should your relationship end, it’s important to ensure you have a Binding Financial Agreement prepared by a family lawyer who is highly experienced..."

In certain circumstances these agreements can be set aside by a court. Therefore if you want to protect your assets or entitlements should your relationship end, it’s important to ensure you have a Binding Financial Agreement prepared by a family lawyer who is highly experienced in this area of law.

The fact is that in Australia a Binding Financial Agreement is the only way that you can seek to protect your assets and entitlements when entering into a marriage or de facto relationship.

We recommend that if you’re concerned about protecting your assets that you start the process as soon as possible and that you contact us at Andersons so that we can assist you with the proper preparation of a pre-nuptial style Binding Financial Agreement.


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Get in touch with today's blog writer:
Eva Bailey

Partner in Family Law  and  Criminal and Police Matters

Please note, this Blog is posted in Adelaide, South Australia by Andersons Solicitors. It relates to Australian Federal legislation. Andersons Solicitors is a medium sized law firm servicing metropolitan Adelaide and regional South Australia across all areas of law for individuals and businesses.


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