Family Law Blog

Are Binding Financial Agreements Still Useful?

Posted by Malcolm Gittoes-Caesar on 22 Jun 2018

In 2017, the High Court of Australia handed down a judgment that could have potentially resulted in Binding Financial Agreements being a thing of the past.  The matter, Thorne v Kennedy, prompted significant thought and media attention - especially by virtue of the fact that the High Court of Australia rarely weighs in on family law matters.

Even with the judgement from this case being taken into account, it has not been my experience that the need for, or applicability of, Binding Financial Agreements has in any way lessened.  

Financial Agreements are designed to clearly set out what should occur with the parties' property and financial resources in the event that their marriage (or de-facto relationship) breaks down.  The matter of Thorne v Kennedy involved a Binding Financial Agreement that was entered into pursuant to Section 90B of the Family Law Act, an agreement made in contemplation of marriage.  

The facts of the case were, in summary, that Mr Kennedy was a person of considerable means (sum $18,000,000 to $24,000,000) and his wife to be was a person of almost no means.  Further, the parties had met on a website for potential brides, and Ms Thorne, who was of European background, travelled to Australia from the Middle East.  The primary Judge who dealt with the matter at first instance found that Ms Thorne's position was that "if the relationship ended, she would having nothing.  No job, no Visa, no home, no place, no community".  

The parties were scheduled to be married on 30 September 2007.  On 8 August 2007, a Solicitor was instructed to prepare the Binding Financial Agreement.  Mr Kennedy had a discussion with Ms Thorne regarding the signing of that Agreement 11 days prior to the wedding, on 19 September 2007.  The evidence found that he made clear that if she did not sign the agreement, the marriage would not go ahead.  By that time, Ms Thorne's family had travelled to Australia for the wedding, and she felt significantly pressured into signing the Agreement.  

Ms Thorne met with a Solicitor on 20 September 2007.  She was strongly advised not to sign the Agreement, as it was, in the Solicitor's words "the worst Agreement she had ever read".  However, Ms Thorne went ahead with signing the Agreement just 4 days prior to the wedding, on 26 September 2007.

The Agreement provided for Ms Thorne to receive very little of Mr Kennedy's wealth in the event that the parties separated.  

The parties did in fact separate, and, thereafter, Mr Kennedy passed away.  The High Court was asked to decide whether the Financial Agreement should stand, given the circumstances surrounding which Ms Thorne had entered into it.  

In short, the High Court found the Agreement should be set aside.  They noted that the primary Judge set out six matters which, in combination, led that Judge to conclude that Ms Thorne had no choice but to enter into the Agreement.  Those six factors are extremely relevant when considering whether a Binding Financial Agreement entered into post Thorne v Kennedy would stand up to scrutiny.  Those matters were:

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

The above points assist us by providing a useful guide to consider whether any Binding Financial Agreement that is to be entered into would be regarded as just and equitable by either the Federal Circuit Court of Australia or the Family Court.  

It is my view that the decision made by the High Court of Australia was always more likely than not to be made.  Taking into account the fact that Ms Thorne received next to nothing, and that such pressure was placed on her, it was clear that the court would likely conclude that the Agreement should be set aside.  

Of course, Binding Financial Agreements can be drafted in such a way as to adequately provide for a person upon separation, which would see the court less likely to set it aside upon the event of a separation.  Therefore, it is not that Binding Financial Agreements pursuant to Section 90B are dead in the water - it is just that bad ones are.  

If you require advice on Binding Financial Agreements, and what constitutes an Agreement that is likely to be upheld by the court, please do not hesitate to contact one of our Accredited Family Law Specialists: