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Jacky Campbell, November 2017

Thorne v Kennedy—has the High Court hung financial agreements out to dry?

There has been a strong reaction, almost panic-stricken, in the media and by lawyers to the first examination of financial agreements by the High Court. Is this reaction justified? Has the High Court hung financial agreements out to dry, or are they still a viable option?

In Thorne v Kennedy [2017] HCA 49; (2017) FLC 93-807 the High Court set aside two financial agreements, casting considerable doubt on the viability of financial agreements which are a bad bargain for one of the parties. Unanimously, the High Court set aside the two agreements for unconscionable conduct. The plurality also set them aside for undue influence, finding it unnecessary to decide whether there was duress. Helpfully, the High Court explained the distinctions between the three concepts, as the concepts are often confused and used interchangeably. The question is, in clarifying the law, did the High Court set such a high bar that it will be impossible for a financial agreement to withstand an application to set it aside?

The facts

The wife was aged 36 and the husband was 67 when they met on a bride website in mid-2006. The wife was living overseas, spoke Greek and very little English. She had no children and no assets of any substance, whilst the husband was an Australian property developer with assets worth at least $18 million. He was divorced from his first wife, and had three adult children.

During their courtship the husband promised the wife that he would look after her like “a queen”. In February 2007 the wife travelled to Australia with the husband and moved into his penthouse. The husband made it clear to the wife prior to her coming to Australia that he wanted to protect his wealth for his children and that, if they were to get married, she would have to sign a legal agreement to that effect. The wife, however, did not learn the terms of the first agreement until 10 days before the wedding. By that stage, the wife’s parents and sister had arrived in Australia from Eastern Europe for the wedding. The husband told the wife that if she failed to sign the first agreement, the wedding was off.

When presented with the draft first agreement, the wife’s only concern was with the testamentary provisions – not the separation provisions. Her solicitor advised the wife orally and in writing not to sign the first agreement, saying that it was all in the husband’s favour. After some minor changes to the testamentary provisions of the first agreement requested by the wife’s solicitors were agreed to by the husband, the wife received further advice on the amended first agreement. Her solicitor again advised her not to sign it. The wife understood her solicitor’s advice to be that it was the worst agreement that the solicitor had ever seen. Under the separation provisions, the wife was to receive a total payment of $50,000 plus CPI in the event of a separation after at least three years of marriage, which the wife’s solicitor described as “piteously small”. In the event of the husband’s death, the wife would receive an apartment worth up to $1.5M, a Mercedes and a continuing income. The wife nevertheless signed the first agreement 4 days before the wedding. The first agreement contained a recital that within 30 days the parties would sign another agreement in similar terms. In November the wife signed the second agreement, revoking the first agreement but otherwise in the same terms. The wife’s solicitor urged her not to sign the second agreement. During the meeting the wife received a telephone call from the husband asking her how much longer she would be. The wife’s solicitor had the impression that the wife was being pressured to sign the second agreement.

The husband signed a separation declaration after the couple had been cohabiting for about 4½ years. It was slightly less than 4 years after the first agreement was signed.

Litigation history

The wife commenced proceedings in the Federal Circuit Court, seeking orders under the Family Law Act 1975 (“FLA”) that both agreements be declared not to be binding and/or to be set aside, and orders for a property settlement and spousal maintenance. The husband died part way through the hearing and the husband’s legal personal representatives were substituted for him in the proceedings.

In March 2015 Demack J in Thorne & Kennedy [2015] FCCA 484 made orders that neither Agreement was binding and set them both aside. Demack J held (at [94]) that the wife had:

“signed the Agreements under duress borne of inequality of bargaining power where there was no outcome to her that was fair and reasonable.”

On 26 September 2016 the Full Court of the Family Court (Strickland, Aldridge and Cronin JJ) in Kennedy & Thorne (2016) FLC 90-737 allowed an appeal by the husband’s estate. The Full Court found that both agreements were binding on the parties, holding that there had not been duress, undue influence or unconscionable conduct by the husband.

On 10 March 2017 the High Court granted special leave to the wife to appeal from the decision of the Full Court of the Family Court. The special leave application is reported as Thorne v Kennedy [2017] HCA Trans 54. Further details of the special leave application are in an article by the writer at http://www.wolterskluwercentral.com.au/legal/family-law/high-court-rule-financial-agreements/

The grounds of appeal were that the Full Court erred in law in failing to find the financial agreements were not binding and they should be set aside on the ground of duress, undue influence or unconscionable conduct.

What did the High Court decide?

The judgment of the plurality was delivered on 8 November 2017 by Kiefel CJ, Bell, Gageler, Keane and Edelman JJ. They held that the findings and conclusion of the trial judge should not have been disturbed by the Full Court and both agreements were voidable due to both undue influence and unconscionable conduct.

The plurality said that the trial judge used duress interchangeably with undue influence, and considered that undue influence was (at [2]) “a better characterisation of her findings”. The plurality decided that it was not necessary to consider whether the agreement should be set aside for duress.

In two separate judgments, Nettle and Gordon JJ agreed that the agreements should be set aside for unconscionable conduct, but did not agree that they should be set aside for undue influence.

Marriage and equitable principles

Although initially the wife’s case was that the principles of common law and equity as described in s 90KA (and also applied in s 90K) might be affected by their statutory context and interpreted differently because of the marital relationship, she conceded (at [23]) “that the principles were not altered although the particular circumstances of the marital context would be taken into account”. The High Court plurality accepted that the same tests applied to marital relationships as to commercial relationships when assessing vitiating factors such as duress, undue influence and unconscionable conduct, although, of course, duress and undue influence generally, if not always, arise in non-commercial contexts.

Requirements of duress

The plurality commenced by considering the requirements of duress, although it held that it was not necessary to decide whether the agreement should be set aside for duress. The plurality described the requirements for duress (at [26]):

“Duress does not require that the person’s will be overborne. Nor does it require that the pressure be such as to deprive the person of any free agency or ability to decide. The person subjected to duress is usually able to assess alternatives and to make a choice. The person submits to the demand knowing ‘only too well’ what he or she is doing” [footnotes removed, but relying strongly on Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40]­

The plurality noted (at [27]) the uncertainty as to whether duress should be based on any unlawful threat or conduct or, whether lawful threats or conduct might suffice. It said that the question was a “difficult” one, but did not shed any light on the answer to it.

The plurality’s view was that it was not necessary for the trial judge (and therefore the High Court) to determine whether there was common law duress, because the sense in which the trial judge described the pressure on the wife was to focus on the wife’s lack of free choice (in the sense used in the undue influence cases) rather than whether the husband was the source of all the relevant pressure, or whether the impropriety or illegitimacy of the husband’s lawful actions might suffice to constitute duress.

Requirements of undue influence

The High Court plurality referred (at [30]) to

“the difficulty of defining undue influence” and that “the boundaries, particularly between undue influence and duress, are blurred”. Undue influence occurred when a party was “deprived … of ‘free agency’” [footnotes removed].

In Johnson v Buttress (1936) 56 CLR 113 at 134; [1936] HCA 41, Dixon J described how undue influence could arise from the “deliberate contrivance” of another (which naturally includes pressure) giving rise to such influence over the mind of the other that the act of the other is not a “free act”. The plurality accepted this analysis, and said (at [32]):

“The question whether a person’s act is ‘free’ requires consideration of the extent to which the person was constrained in assessing alternatives and deciding between them. Pressure can deprive a person of free choice in this sense where it causes the person substantially to subordinate his or her will to that of the other party … It is not necessary for a conclusion that a person’s free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a ‘mere channel through which the will of the defendant operated’. Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be ‘markedly sub-standard’ as a result of the effect upon the person’s mind of the will of another.” [footnotes omitted]

The plurality noted (at [14]) that there were different ways to prove the existence of undue influence. One method of proof was by direct evidence of the circumstances of the particular transaction and that was the approach relied upon by the trial judge and the High Court. The plurality rejected the proposition that the wife was entitled to the benefit of a presumption of undue influence because of the relationship of fiancé and fiancée, as that presumption no longer existed.

Requirements of unconscionable conduct

The parties agreed that the applicable principles of unconscionable conduct in equity were recently restated by the High Court in Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25. No submissions were made as to whether the statutory concept of unconscionable conduct in s 90K(1)(e) might differ from the equitable concept in s 90K(1)(b) and the High Court did not determine that issue.

A finding of unconscionable conduct requires (at [38]) the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage, and have known or ought to have known of the existence and effect of the special disadvantage.

The plurality quoted favourably from Amadio (1983) 151 CLR 447 at 461, where Mason J emphasised the difference between unconscionable conduct and undue influence:

“In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position’.”

The trial judge’s decision

The plurality found that the trial judge was at a considerable advantage in assessing the parties and their personalities, particularly where issues of undue influence and unconscionable conduct were involved. In Kakavas the High Court said that where a transaction is sought to be impugned for vitiating factors, such as duress, undue influence or unconscionable conduct, it is necessary for a trial judge to conduct a “close consideration of the facts.” On appeal, it is essential for the appellate court to scrutinise the trial judge’s findings in light of the advantages enjoyed by the trial judge.

The trial judge posed the hypothetical question of why the wife would sign an agreement when she understood the advice of her solicitor to be that the agreement was the worst that the solicitor had ever seen. The trial judge also asked, despite the advice of her solicitor, why the wife failed to conceive of the notion that the husband might end the marriage.

The trial judge described duress ([2015] FCCA 484 at [68]) as “a form of unconscionable conduct”. The plurality said that this did not mean that duress was subsumed within the doctrine of unconscionable transactions, but the trial judge used “unconscionable” in the sense described by Gaudron, McHugh, Gummow and Hayne JJ in Garcia v National Australia Bank Ltd [(1998) 194 CLR 395 (at [34])] as “to characterise the result rather than to identify the reasoning that leads to the application of that description”.

The trial judge concluded that the wife was powerless to make any decision other than to sign the first agreement, and referred to an inequality of bargaining power and a lack of any outcome for the wife that was “fair or reasonable”. However, the trial judge also explained that the wife’s situation was “much more than inequality of financial position”, setting out six matters which, in combination, led her to the conclusion that the wife had “no choice” or was powerless:

  1. Her lack of financial equality with the husband;
  2. Her lack of permanent status in Australia at the time;
  3. Her reliance on the husband for all things;
  4. Her emotional connectedness to their relationship and the prospect of motherhood;
  5. Her emotional preparation for marriage; and
  6. The “publicness” of her upcoming marriage.

These six matters were the basis for what the plurality described as the “vivid” description by the trial judge (quoted at [47]) of the wife’s circumstances:

“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.”

As to the second agreement, the High Court plurality noted (at [48]) that trial judge held that it was “simply a continuation of the first – the marriage would be at an end before it was begun if it wasn’t signed”. In effect, the trial judge’s conclusion was that the same matters which vitiated the first agreement, with the exception of the time pressure caused by the impending wedding, also vitiated the second agreement. The factors had not otherwise dissipated.

The Full Court’s decision

The Full Court found that the agreements were fair and reasonable because, as summarised by the plurality (at [51]):

  1. The husband had told the wife at the outset of their relationship, and she had accepted, that his wealth was intended for his children
  2. The wife’s interest, which was provided for in the agreements, concerned only the provision that would be made for her in the event the husband predeceased her.

The Full Court held that the wife could not have been subject to undue influence because she acquiesced in the husband’s desire to protect his assets for his children and because she had no concern about what she would receive on separation. The Full Court also held that the husband’s conduct was not unconscionable because he did not take advantage of the wife, referring to:

  1. Its findings of the lack of any misrepresentation by the husband about his financial position;
  2. The husband’s early statements to the wife that made clear that she would not receive any part of his wealth on separation;
  3. The wife’s staunch belief that the husband would never leave her and her lack of concern about her financial position while the husband was alive; and
  4. The husband’s acceptance of handwritten amendments to the agreements that were made by the wife’s solicitor.

The High Court plurality, noting (at [54]) the advantages enjoyed by the trial judge in evaluating the evidence, said that with one exception, none of the findings of fact by the trial judge were overturned by the Full Court. That exception was the Full Court’s rejection of the trial judge’s finding that there was no outcome available to the wife that was fair or reasonable. The High Court found that the Full Court erred in rejecting this finding. It was open to the trial judge to conclude that the husband, as the wife knew, was not prepared to amend the agreement other than in minor respects. Further, the High Court plurality said (at [55]) that the description of the agreements by the trial judge as not being “fair or reasonable” was not merely open to her, it was “an understatement”. The unchallenged evidence of the wife’s solicitor was that the terms of the agreements were “entirely inappropriate” and wholly inadequate.

As the terms of the agreement were so unfavourable to the wife – a bad bargain – the plurality considered those terms to be relevant to a finding of undue influence. It said (at [56]) that the trial 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.”

The plurality did not agree with the Full Court that the trial judge’s conclusion was based only upon an inequality of bargaining power. The trial judge carefully set out the 6 specific factors (stated earlier in this paper) which, together with the lack of a fair or reasonable outcome, led her to the conclusion that the wife had no choice but to enter into the two agreements.

In circumstances where the Full Court accepted almost all of the finding of fact, and had erred in not accepting there was no outcome available to the wife which was fair and reasonable, the High Court plurality said that the Full Court ought to have found that the wife was subject to undue influence, albeit

mis-described by the trial judge as duress.

The plurality’s conclusion

The plurality set out factors which it identified as being relevant to whether a financial agreement should be set aside for undue influence (at [60]):

  1. Whether the agreement was offered on a basis that it was not subject to negotiation;
  2. The emotional circumstances in which the agreement was entered including any explicit or implicit threat to end a marriage or to end an engagement;
  3. Whether there was any time for careful reflection;
  4. The nature of the parties’ relationship;
  5. The relative financial positions of the parties; and
  6. The independent advice that was received and whether there was time to reflect on that advice.

These factors were not only important to the determination in this case, but clear guidance as to the factors which should be looked at in future applications to set aside a financial agreement for undue influence.

In relation to unconscionable conduct, the High Court plurality relied on Amadio and said (at [64-65]) that the adjective “special” in the requirement for “special disadvantage” is “used to emphasise that 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 trial judge found that the wife’s powerlessness and lack of choice but to enter into the agreements pointed inevitably to the conclusion that she was at a special disadvantage. The husband was aware of the wife’s special disadvantage and it was, in part, created by him:

  1. He created the urgency with which the pre-nuptial agreement was required to be signed and the haste surrounding the post-nuptial agreement and the advice upon it.
  2. She had no reason to anticipate an intention on his part to insist upon terms of marriage that were as unreasonable as those contained in the agreements, even though she knew in advance that there was to be some type of document.
  3. The wife and her family members had been brought to Australia for the wedding by the husband and his ultimatum was not accompanied by any offer to assist them to return home.

The High Court plurality said these matters increased the pressure which contributed to the substantial subordination of the wife’s free will in relation to the agreements. The husband took advantage of the wife’s vulnerability to obtain agreements which, on the uncontested assessment of the wife’s solicitor, were entirely inappropriate and wholly inadequate.

Minority judgments

There were two separate minority judgments, being of Justices Nettle and Gordon. Both agreed that the 2 agreements should be set aside for unconscionability, but not for undue influence.

Justice Nettle felt he could not depart from the decision of the Court of Appeal of the Supreme Court of New South Wales in Australia & New Zealand Banking Group v Karam (2005) 64 NSWLR 149, which decided that the concept of illegitimate pressure should be restricted to the exertion of pressure by “threatened or actual unlawful conduct”. He said that had “largely been followed without demur”.

Justice Nettle said (at [71]) that there was much to be said for the view that, the test of illegitimate pressure should be whether the pressure goes beyond what is reasonably necessary for the protection of legitimate interests. However, the equitable doctrine of unconscionable conduct did not have the same restrictions as undue influence and is not restricted to unlawful means.

Although Nettle J believed that the concept of illegitimate pressure might be more appropriate for this case, it was also capable of being seen as unconscionable conduct, for reasons similar to those expressed by the plurality. Like the plurality, Nettle J’s view (at [76]) was that the circumstances had so affected the wife’s state of mind that she was incapable of make a judgement in her own interests. There was no other rational explanation for the wife’s decision not to insist upon the substantive changes which her solicitor recommended, and instead to acquiesce to the husband’s “extraordinary demands”.

The second agreement was dependent for its efficacy upon the first agreement, and so it fell with the earlier agreement, but, if that were not so (at [77]) the wife was “in a position of special disadvantage which rendered her even less capable of making a decision in her own best interests to refuse to sign the second agreement than she had been capable at the time of the first agreement of insisting upon amendments in accordance with [her solicitor’s] recommendations”. On this analysis, the second agreement was more at risk of being set aside than the first agreement.

Justice Nettle held that it was against equity and good conscience for the husband or his successors to be permitted to enforce either agreement.

Justice Gordon said in relation to unconscionability, (at [81]) that although the wife’s “independent, informed and voluntary will was not impaired, she was unable, in the circumstances, to make a rational judgement to protect her own interests”. Those circumstances were evident to and substantially created by the husband, and it was unconscionable for the husband to procure or accept the wife’s assent to the agreements.

Justice Gordon held that undue influence did not apply because (at [80]) the wife’s “capacity to make an independent judgment was not affected”. She “was able to comprehend what she was doing when she signed the agreements, and that she knew and recognised the effect and importance of the advice she was given”. Moreover, she wanted the marriage to proceed and to prosper. She knew and understood that it would proceed only if she accepted his terms. Once she decided to go ahead with the marriage, it was right to say, as the trial judge said, that she had “no choice” except to enter into the agreements. No other terms were available. But her capacity to make an independent, informed and voluntary judgment about whether to marry on those terms was unaffected and she chose to proceed. Her will was not overborne.

Justice Gordon set out the requirements to establish unconscionable conduct (at [113]):

“A special disadvantage may also be discerned from the relationship between parties to a transaction; for instance, where there is ‘a strong emotional dependence or attachment’ … Whichever matters are relevant to a given case, it is not sufficient that they give rise to inequality of bargaining power: a special disadvantage is one that “seriously affects” the weaker party’s ability to safeguard their interests.”

She found that the wife was under a special disadvantage and that the agreements were “grossly improvident” (Bridgewater v Leahy (1998) 194 CLR 457 at 493). It was relevant that the wife’s entitlements in the event of separation were (at [121]) “extraordinarily and disproportionately small in comparison to what the wife would have been entitled to if she had not entered into the agreements”. Unlike the other judges, who looked at the general fairness of the agreements, Gordon J, expressly compared the wife’s entitlements under the agreements to her entitlements under the FLA, if she had not entered into the agreements.

Although the wife was expecting an agreement about the husband’s wealth, he had brought her to Australia promising to look after her like “a queen” and it was only 10 days before the wedding that she received detailed information about the husband’s finances and became aware of the specific contents of the first agreement.

Justice Gordon said (at [123]) that the fact that the wife received independent legal advice about the two agreements and rejected her solicitor’s recommendation on each occasion did not mean that there was not unconscionable conduct. The fact that she was willing to sign both agreements despite being advised that they were “terrible” served to underscore the extent of the special disadvantage under which she laboured, and to reinforce the conclusion that it was unconscientious for the husband to procure or accept her assent.

Section 90F

The agreements included an “acknowledgement” that the wife was able to support herself without an income tested pension, allowance or benefit, taking into account the terms and effect of the agreement when the agreement came into effect. This statement was designed to ensure that the agreement, in compliance with s 90F, ousted the jurisdiction of the court to make an order for spousal maintenance.

As the plurality said, this statement was made (at [20]) despite the wife’s “extremely limited personal means”. The plurality made no findings on whether the s 90F declaration was effective as submissions were not made with respect to it either in the Full Court of the Family Court or in the High Court, but the plurality appeared to express doubt as to whether the wife was bound by her “acknowledgment”. The High Court drew the attention of the parties to the issue, but because of the way the case was presented it was significant only (at [20]) “as a matter of contextual construction”, which suggests that the incorrect statement may have assisted the plurality to reach the conclusions it made.

What next?

The High Court unanimously agreed that a financial agreement which was a bad bargain for a party who had been given legal advice not to enter into it, might be evidence of a vitiating factor such as duress, undue influence and unconscionable conduct. In the process, it clarified aspects of the law relating to the financial agreements, but also created new uncertainties.

Areas where Thorne v Kennedy gives some clarity for the future include:

  1. The High Court listed six factors (which were not intended to be exclusive) which will have prominence in assessing where there has been undue influence in the particular context of pre-nuptial and post-nuptial agreements. They are repeated here because of their importance:
    1. Whether the agreement was offered on a basis that it was not subject to negotiation;
    2. The emotional circumstances in which the agreement was entered including any explicit or implicit threat to end a marriage or to end an engagement;
    3. Whether there was any time for careful reflection;
    4. The nature of the parties’ relationship;
    5. The relative financial positions of the parties; and
    6. The independent advice that was received and whether there was time to reflect on that advice.
  2. Unfair and unreasonable terms of a financial agreement are relevant to a consideration of whether there has been undue influence or unconscionable conduct.
  3. It is safer if the agreement provides for a fair outcome, by reference to s 79 or otherwise, and is not a “bad bargain”.
  4. Entering into an agreement after marriage in the same terms as one entered into before the marriage will not overcome issues of undue influence or unconscionable conduct associated with the pre-nuptial agreement.
  5. There is no longer any doubt as to whether undue influence can arise where a party has received independent legal advice.
  6. Solicitors are sensible to be wary of “ink on the wedding dress” or “ink on the tuxedo” type agreements. If there are those concerns, the better approach is probably not to have a pre-nuptial agreement, but to simply have a post-nuptial agreement. Of course, the client may not want to marry without an agreement, because of the risk that the other party may not sign one afterwards. In Thorne v Kennedy the pre-nuptial agreement required both parties to enter into a post-nuptial agreement in the same terms as the pre-nuptial agreement, which was almost certainly counter-productive to finding that she entered into the second agreement voluntarily.
  7. The principles of common law and equity are interpreted in the same way in a marital relationship as in other contexts.
  8. The relationship of fiancé and fiancée is no longer a category of relationship where the presumption of undue influence applies.

Whilst the High Court gave clarity on some issues, many others were left unresolved. In reality, there are more uncertainties than there were before. These include:

  1. How will the 6 factors be applied to other cases? – Dilemmas will undoubtedly arise when applying them to other facts. Does every factor need to be relevant? How long is needed for “careful reflection”? What if there are limited negotiations? What if the advice received by the weaker party was not as emphatic as it was in Thorne v Kennedy?
  2. Although the plurality was clear that the circumstances constituted undue influence, there were two dissenting judgments.
  3. Duress – The High Court did not address whether the agreements could have been set aside for duress.
  4. Lawful act duress – There is limited Australian authority on “lawful act duress” and conflicting authority in England as to whether pressure must be “illegitimate” to constitute duress. The law in this area has not been clarified.
  5. Test for “bad bargain” – The plurality described the agreements as “unfair and unreasonable”, and Nettle J described the husband’s demands as “extraordinary”. Only Gordon J expressly tested the terms of the agreements against the wife’s entitlements under the FLA without the agreements. Is Gordon J correct? Or are financial agreements in the context of vitiating factors tested against another standard, such as whether the terms are “unfair and unreasonable” or simply a “bad bargain”? How bad does a bad bargain have to be?
  6. Effect on s 90K(1)(a) – Will “a bad bargain” mean that a financial agreement is more likely to be set aside for fraud, remembering that the court has a discretion as to whether to set aside an agreement, even if it finds that there was fraud?
  7. Effect on s 90K(1)(d) – Will the test for hardship in relation to the care of children in Fewster & Drake (2016) FLC 93-745; [2016] FamCAFC 124 be ameliorated and the courts adopt a test along the lines of the test in Pascot & Pascot [2011] FamCAFC 945?
  8. Meaning and effect of s 90KA – The High Court did not consider the meaning and effect of s 90KA, which is an issue the Family Law Courts have struggled with.
  9. Unconscionability – Whether there is a distinction between unconscionability making the agreement void, voidable or unenforceable under s 90K(1)(b) and statutory unconscionability under s 90K(1)(e) remains unresolved.
  10. Third parties – The case was only concerned with the presence of a vitiating factor between parties to an agreement. The plurality noted that duress, undue influence or unconscionable conduct by a third party raises different issues.
  11. Section 90F – What is the effect of a statement in an agreement that a party is able to support themselves without an income-tested pension, allowance or benefit when that statement is untrue? This issue was raised by the High Court plurality which seemed to express doubt as to the effectiveness of such statements, but the issue was not determined.
  12. False recitals – If s 90F statements are not effective when they are clearly untrue, what about statements that the parties had the ability to inspect financial disclosure of the other party or engage accountants or valuers but chose not to do so, when in fact they had no real choice? If there is unequal bargaining power and the parties state that they have waived their rights to seek disclosure, will this help to establish that there has been undue influence or unconscionable conduct?
  13. Section 79A – How do the principles of undue influence and unconscionable conduct apply when a party is seeking to set aside a property settlement order under s 79A? Whilst s 79A(1)(a) expressly refers to duress (which appears to be difficult to establish), does “any other circumstance” include undue influence and unconscionable conduct as applied by the High Court to financial agreements? The High Court said that despite legal advice there could still be undue influence. If the “agreement” has been made into orders of the court, does this intervening step reduce the likelihood of establishing undue influence?
  14. Dection 90G(1A) and “bad bargains” – A majority of the Full Court of the Family Court in Hoult & Hoult (2013) FLC 93-546; [2013] FamCAFC 214 said that the terms of the bargain were irrelevant when considering whether a financial agreement which does not meet the s 90G requirements should be “saved” under s 90G(1A) because it is “unjust and inequitable” if the agreement is not binding on the parties. Some judges, such as Murphy J (the trial judge in Hoult), and Thackray J (who supported the orders of the majority in Hoult but for different reasons) disagreed. Is it now open, and indeed proper, for the Family Law Courts to re-consider whether a “bad bargain” should influence the exercise of the s 90G(1B) discretion as to whether it is “unjust and inequitable if the agreement were not binding on the spouse parties to the agreement”. Considerable weight was attributed by the High Court to the unfairness and unreasonableness of an agreement when considering whether there were vitiating factors under s 90K. Why should the s 90G(1A) discretion not take into account the fairness and reasonableness of the agreement? Why can’t the court consider contractual concepts, such as whether it is a “bad bargain” or whether the agreement is “unfair and unreasonable” in considering whether it is “unjust and inequitable” for this type of contract not to be binding?

Conclusion

The impact of Thorne v Kennedy reaches beyond cases where a party is seeking to set aside a financial agreement for a vitiating factor such as duress, undue influence or unconscionable conduct. Whilst its most obvious effect will be on lawyers (and their clients) negotiating pre-nuptial agreements where the parties have unequal bargaining power, Thorne v Kennedy is a salutary warning to all lawyers to be careful when negotiating and advising on all financial agreements, and possibly property settlement orders under s 79 and 90UM. It is also a useful reminder we are dealing with contracts. Financial agreements are a form of contract but they are still contracts, and subject to contract law. There is nothing special about them to take them out of the realms of contract law. Despite the introduction of s 90G(1A)–(1C), which gives the court a discretion to save agreements which do not comply with the s 90G(1) requirements, the safest way to ensure a financial agreement is binding is to meet those requirements and for the terms of the agreement to result in a fair outcome for the less wealthy party.

 

 

© Copyright – Jacqueline Campbell of Forte Family Lawyers and Wolters Kluwer/CCH. This paper uses some material written for publication in Wolters Kluwer/CCH Australian Family Law and Practice. The material is used with the kind permission of Wolters Kluwer/CCH.

Jacky Campbell

Partner

University qualifications

Master of Laws, Monash University

Bachelor of Laws, Monash University

Bachelor of Arts, Monash University

Graduate Diploma of Professional Writing, Deakin University

Other qualifications
Accredited Family Law Specialist,
Law Institute of Victoria

Email Jacky Campbell
jcampbell@fortefamilylawyers.com.au

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Publications
To read Jacky Campbell’s articles and papers click here.

In 2020, Jacky was recognised as a leading family lawyer in Melbourne by Doyle’s Guide to the Australian Legal Market as well as one of Melbourne’s leading family lawyers in High-value and Complex Property matters, and a recommended lawyer in parenting matters. Jacky was also a recommended lawyer in the Doyle’s leading family and divorce lawyers in Australia. Jacky writes extensively on complex aspects of family law and her up-to-date knowledge means that she is able to provide accurate information about the law. She combines this with offering strategic advice to clients and guidance as to the best approach to take in their particular circumstances.

Jacky wrote her Masters thesis on the relationship of bankruptcy and family law. She continues to have a special interest in matters involving bankruptcy, insolvency, liquidation and receivership.

Jacky received the Law Institute of Victoria Rogers Legal Writing Award 2004—for the article “Splitting the Super…and Selling the Home”. She is experienced with complex superannuation interests such as defined benefit funds and self managed superannuation funds.

Jacky is the consultant editor of Wolters Kluwer/CCH Australian Family Law and Practice and contributing author to Wolters Kluwer/CCH Australian Family Law and Practice to the Property, Spousal Maintenance, Financial Agreements, Maintenance Agreements, Procedure and Precedents tabs. She writes several chapters of the Wolters/Kluwer CCH Australian Master Family Law Guide, and is the author of the family law chapters in the Thomson-Reuters Australian Financial Planning Handbook and in the CCH Australian Master Superannuation Guide.

Jacky is a Fellow of the International Academy of Family Lawyers, a board member of the Asia Pacific Chapter of that Academy, and an Associate of the American Bar Association. She acts for many clients who are overseas or where there is an international element such as overseas assets and international child abduction under the Hague Convention. She is also experienced in Australian and overseas surrogacy arrangements and in disputes about the role of a sperm donor. She is a member of the Maintenance and Property Committee of the Family Law Section of the Law Institute of Victoria, the Family Law Section of the Law Council of Australia and Victorian Women Lawyers.

Jacky is keen to assist clients to resolve matters before trial through alternative dispute resolution processes including mediation. She is a trained arbitrator and is an arbitrator with The Alternative Courtroom.

Wendy Kayler-Thomson

PARTNER

University qualifications

Master of Laws, Monash University

Bachelor of Laws, University of Melbourne

Bachelor of Commerce, University of Melbourne

Other qualifications
Accredited Family Law Specialist, Law Institute of Victoria

Email Wendy Kayler-Thomson
wkaylerthomson@fortefamilylawyers.com.au

Connect on LinkedIn

Wendy Kayler-Thomson is a partner of Forte Family Lawyers and has practised as a lawyer specialising in family law for more than 25 years. Wendy is recognised as one of Melbourne’s leading family lawyers in Doyle’s 2020 Guide to the Australian Legal Market.

Wendy is the Immediate Past Chair of the Family Law Section of the Law Council of Australia, the peak body for Australian family lawyers, and has been a member of the Executive of the Family Law Section for more than 10 years. The Family Law Section is regularly consulted by the Federal government and the Courts about changes to family law and court procedures. As a result, Wendy is able to offer her clients the most up to date advice on family law and strategies to take advantage of future changes.

Wendy’s time as Chair of the Family Law Section (from 2016 to 2018) coincided with a period of great controversy and unprecedented attention on the reform of family law and the family law system. This included the Victorian Royal Commission into family violence, the Federal Parliamentary enquiry into the family law system and family violence, the Australian Law Reform Commission’s Family Law Review and the Federal Government’s proposal to restructure the Family Court and Federal Circuit Court.

Wendy was a member of the Advisory Committee to the Australian Law Reform Commission’s Family Law Review, the most comprehensive review of family law and the family law sector in 40 years.

Wendy was also a member of the Advisory Committee to the Law Council of Australia’s 2018 Justice Project, chaired by former High Court of Australia Chief Justice, the Hon. Robert French. The Justice Project is one of the most comprehensive, national reviews into the state of access to justice in Australia in the past 40 years.

Wendy develops close and trusted relationships with her clients and the wide network of professionals that refer her work. Wendy’s approach is tailored to each individual client’s needs, recognising that for most people, the breakdown of a relationship is one of their most stressful and challenging experiences. Wendy brings a high attention to detail, strategic advice and a depth of expert knowledge about family law. Wendy has a commercial background and has acted for many clients with complex financial arrangements. She works closely with her clients’ accountants and other professional advisors to ensure that all the complexities of those arrangements, including tax impacts and restructuring, are dealt with as part of any settlement.

Wendy has undertaken extensive training in a wide range of social sciences that impact on families and their children, including family and domestic violence, parental alienation, personality disorders, drug and alcohol addiction and high conflict. Wendy’s clients benefit from her knowledge of the most up to date approaches by child psychologists and other experts to managing the post-separation care arrangements of children. Wendy has particular expertise in cases where one parent wants to relocate with the children interstate or overseas.

Wendy is also a member of the Executive Committee of the Family Law Section of the Law Institute of Victoria, the Family Law Section of the Law Council of Australia, the Association of Family and Conciliation Courts, the Australian Institute of Family Law Arbitrators and Mediators and Victorian Women Lawyers.

Jemma Mackenzie

Senior Associate

University qualifications

Bachelor of Laws (Hons) Monash University
Bachelor of Arts (Hons) Monash University

Email Jemma Mackenzie
jmackenzie@fortefamilylawyers.com.au

Other qualifications
Accredited Family Law Specialist,
Law Institute of Victoria

Connect on LinkedIn

Jemma is a Senior Associate at Forte Family Lawyers. She has worked predominantly in family law since being admitted to legal practice in December 2009.

Jemma obtained Specialist Accreditation as a Family Lawyer from the Law Institute of Victoria in 2015. Accreditation recognises the high level of knowledge and practical skills Jemma brings to each family law matter.

Jemma is mindful that the breakdown of a marriage or de facto relationship can be a stressful and often overwhelming experience for clients. She works with her clients to identify appropriate pathways for resolving both parenting and property matters.

Jemma prides herself on her ability to effectively communicate what can be complex legal principles and to provide realistic, up to date and accurate legal advice at each stage of a matter.

Jemma has experience in a wide variety of family law matters including division of property, maintenance (including urgent applications), Financial Agreements (including Agreements made prior to marriage), care and living arrangements for children, child support and family violence – including Intervention Order proceedings.

Prior to joining Forte Family Lawyers, Jemma worked in a Bayside family law firm and a boutique firm in Melbourne’s eastern suburbs. She has conducted litigation in both the Family Court of Australia and Federal Circuit Court in Melbourne and interstate.

In addition to her daily work with clients, Jemma has made presentations to financial advisors and medico-legal professionals about the family law system in Australia and what clients should know about family law prior to separating.

Jemma is a member of Victorian Women Lawyers, the Family Law Section of the Law Council of Australia and the Family Law Section of the Law Institute of Victoria.

Jane Bentley

Senior Associate

University Qualifications

Masters of Applied Law (Family Law), College of Law

Bachelor of Laws, Victoria University

Bachelor of Science, University of Melbourne

Email Jane Bentley

jbentley@fortefamilylawyers.com.au

Other Qualifications

Accredited Family Law Specialist, Law Institute of Victoria

Jane is a Senior Associate at Forte Family Lawyers. Jane is an Accredited Family Law Specialist as a recognised by the Law Institute of Victoria. Accredited Specialists demonstrate superior knowledge, experience and proficiency in their specialist area of law.

Additionally, Jane has undertaken a Masters of Applied Law in Family Law.

Prior to joining the firm, Jane has worked in both the private and community sectors where she worked on both complex parenting and property matters, regularly appeared in the Family Law Courts and through her work at a commercial firm Jane was able to build and enhance her commercial skills. Throughout her career, Jane has worked collaboratively with commercial lawyers providing advice where both family and commercial law intersect, as well as working directly with professionals on family law matters including psychologists, mediators, accountants and financial advisors.

Jane has a wide range of experience in different family law matters including financial agreements, family violence, parenting, IVF issues, matters involving grandparents, Hague Child Abduction Convention, child support, property and spousal maintenance.

Jane prides herself on her ability to communicate effectively with her clients during an emotional and challenging time. Jane builds strong relationships with her clients as she recognises that the legal system can appear complex and daunting and works with her clients to guide them through the process.

Jane is a member of the Courts Practice and the Property and Maintenance Committees of the Law Institute of Victoria which ensures that she is appraised of recent developments in family law and at the Family Law Courts. Jane is also a member of the Family Law Section of the Law Council of Australia.

Matthew Beckmans

Senior Associate

University qualifications

Bachelor of Laws, University of Western Sydney

Email Matthew Beckmans
mbeckmans@fortefamilylawyers.com.au

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Matthew commenced his legal career practising in a medium-sized rural law firm. Matthew is able to draw on his broad experiences over a number of practice areas, prior to practising exclusively in family law, to offer clients a well-rounded approach to tactically resolve complex legal issues.

Matthew has developed a special interest in complex disputes involving companies and trusts, insolvency and bankruptcy, taxation, and international/domestic relocation.  He also has a particular expertise in child support.

Matthew is aware and mindful of the financial challenges and restraints when attempting to resolve family law disputes, and sets out to achieve negotiated and cost effective outcomes which avoid court where possible. Matthew recognises the emotional issues attached to the breakdown of a relationship, and draws on his strong communication skills in demystifying the family law process, and to identify and explain possible options for resolution in a concise manner.

Matthew was a member of the steering committee of the Riverina Family Law Pathways Network, secretary of the South West Slopes Law Society, and a mock trial magistrate for the Law Society of New South Wales.

Prior to practising law, Matthew was rookie listed by the Sydney Swans, where he enjoyed a brief career.  He now plays for the Monash Blues in the VAFA.

Matthew is a member of the Family Law Sections of the Law Council of Australia and the Law Institute of Victoria.  He is on the Court Practice Committee of the Family Law Section of the Law Institute of Victoria.

Vinh Nguyen

Associate

University qualifications

Bachelor of Laws, Deakin University

Bachelor of Commerce, Deakin University

Email Vinh Nguyen
vnguyen@fortefamilylawyers.com.au

Connect on LinkedIn

Vinh first worked at Forte Family Lawyers as part of his Graduate Diploma in Legal Practice at the Leo Cussen Institute for Law in 2017. He joined Forte Family Lawyers as a lawyer after his admission into legal practice in October 2017 and has, since then, worked solely in family law.

Prior to his admission as a lawyer, Vinh worked as a paralegal in a community legal centre and in a property and commercial law firm, where he gained valuable experience in property transactions.

Vinh is a member of the Family Law Section of the Law Council of Australia, the Law Institute of Victoria and the Asian Australian Lawyers’ Association. Vinh also volunteers at the Darebin Community Legal Centre.

Vinh is fluent in Vietnamese.

 

 

 

Natasha Mastroianni

Associate

University Qualifications

Bachelor of Laws (Hons), Latrobe University

Bachelor of Arts, Latrobe University

Masters of Applied Law (Family Law), College of Law

Email Natasha Mastroianni

nmastroianni@fortefamilylawyers.com.au

 

 

Connect on LinkedIn

Natasha Mastroianni has experience in a range of family law matters, including property settlements, financial agreements, parenting matters (including interstate and overseas relocation issues), child support and intervention order proceedings.

Natasha was admitted to practice in August 2014 and commenced her career in a generalist practice where she gained experience in family law, property law, wills and estates. Natasha worked in a boutique family law practice prior to commencing at Forte in February 2020.

Natasha has a Masters of Applied Law (Family Law) from the College of Law and speaks conversational Italian.

Having practical experience in other areas of law assists Natasha to understand the interrelated issues involved in her clients’ family law matters. She regularly appears on behalf of clients at Duty List Hearings and other Court events in the Federal Circuit Court, Family Court of Australia and the Magistrates’ Court of Victoria. Natasha also appears as a solicitor agent for interstate or rural practitioners when required.

Natasha prides herself on being able to understand and manage her clients’ expectations whilst providing realistic and practical advice. She acts with empathy and compassion when striving to achieve the best possible results for her clients.

Natasha is a volunteer lawyer with the Women’s Legal Service and is the Vice President of the Northern Suburbs Law Association. She is also a member of the Courts Practice Committee of the Family Law Section of the Law Institute of Victoria, the Family Law Section of the Law Council of Australia and Victorian Women Lawyers.

Mark Di Donato

Lawyer

University Qualifications

Bachelor of Criminology and Justice, Navitas College of Public Safety

Juris Doctor, Monash University

Email Mark Di Donato

mdidonato@fortefamilylawyers.com.au

Connect on LinkedIn

Mark started work at Forte Family Lawyers as part of his Graduate Diploma in Legal Practice at the Leo Cussen Institute for Law in 2019. Mark was later admitted into the legal practice in September 2019 and transitioned into a lawyer role with Forte Family Lawyers in February 2020.

Prior to his admission as a lawyer, Mark volunteered as a paralegal at Darebin Community Legal Centre and interned at a commercial law firm, where he gained valuable experience in property transactions and in intellectual property. Mark also completed a Professional Placement whilst completing his law degree where he provided legal advice on various family law matters through the Monash Law Clinic.

Mark is a member of the Family Law Section of the Law Council of Australia, and the Law Institute of Victoria. Mark volunteers at the Darebin Community Legal Centre and has provided advice on a range of issues including family law.