Thorne v Kennedy 2017 HCA 49
The full Court of the High Court has handed down a decision in the matter of Thorne v Kennedy  HCA 49 on 8 November 2017. The Court has determined the issue of undue influence and unconscionable conduct when signing financial agreements prior to and shortly after marriage.
The matter involved an eastern European woman, Ms Thorne, who came to Australia to marry Mr Kennedy. Kennedy was worth between $18-20 million and told Ms Thorne that she must sign a financial agreement 10 days before the wedding, telling her the wedding would be called off if she refused to sign. Thorne’s solicitor advised her that the agreement was “the worst agreement she had ever seen” and not to sign it.
Despite detailed advice from her solicitor (both orally and in writing), Ms Thorne signed the agreement four days prior to the wedding. Ms Thorne told her solicitor that she felt she had no choice as she would have no home, no visa and no money if the wedding was called off. Her family had also been flown to Australia for the wedding by Mr Kennedy and had no prospect of being able to return home if Mr Kennedy did not assist with airfares.
Four days after the wedding Mr Kennedy drove Ms Thorne to her solicitor to sign a second agreement, on the same terms as the first. Ms Thorne’s solicitor advised again that the agreement was not in her interest and that she should not sign. During her conference with the solicitor Mr Kennedy telephoned Ms Thorne asking her how long she was going to be. Ms Thorne’s solicitor noted that this had occurred and that she should not sign if she felt pressured into doing so. Ms Thorne signed the second agreement.
The Primary judge found that “Ms Thorne’s circumstances led her to believe that she had no choice, and was powerless, to act in any way other than to sign the pre-nuptial agreement. Her Honour held that the post-nuptial agreement was signed while the circumstances continued, with the exception of the time pressure.”[at 2]
The primary judge set the agreements aside on the basis of duress and listed six factors which she considered when determining her judgment in regards to the choice Ms Thorne had (or didn’t have). These six factors were considered carefully by the High Court and formed a significant part of the determination of the matter. They are as follows:
- her lack of financial equality with Mr Kennedy;
- her lack of permanent status in Australia at the time;
- her reliance on Mr Kennedy for all things;
- her emotional connectedness to their relationship and the prospect of motherhood;
- her emotional preparation for marriage; and
- the “publicness”[at 93 of the original decision)
The Full Court of the Family Court (Strickland, Aldridge and Cronin JJ) allowed an appeal by the Husband, upholding the agreements, setting aside the decision of the primary judge on the basis “that the agreements had not been vitiated by duress, undue influence, or unconscionable conduct.”[at 2] and that “a finding of financial inequality could never provide a reasoned basis for duress.” (Kennedy & Thorne  FLC 93-737 at 81.)
The majority of the High Court, Kiefel CJ, Bell, Gageler, Keane and Edelman JJ held that the appeal should be allowed and that the agreements should be set aside on the basis of unconscionable conduct and undue influence. Noting that “Ms Thorne’s vulnerability to obtain agreements which, on Ms Harrison’s uncontested assessment, were entirely inappropriate and wholly inadequate.” [At 65]
To distinguish undue influence and unconscionable conduct, the majority relied on the explanation given by Mason J in Commercial Bank of Australia Ltd V Amadio (1983) 151 CLR 447 at 461:
“in the latter (undue influence) the will of innocent party is not independent and voluntary because it is overborne. In the former (unconscionable conduct) 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 majority also relied on the judgment of Dixon CJ, McTiernan and Kitto JJ in the matter of Jenyns v Public Curator (Q) (1953) 90 CLR 113 at 118-119;  HCA 2:
“a court of equity takes a more comprehensive view, and looks to every connected circumstance that ought to influence its determination upon the real justice of the case.”
Essentially, the majority found that there is no precise formula in matters such as financial agreements to determine unconscionable conduct and undue influence and that it is “necessary for a trial judge to conduct a close consideration of the facts …in order to determine whether a claim to relief has been established.”[at 41]
Nettle J, while agreeing with majority added to their judgment noting that
“it can hardly be supposed that a young woman in Ms Thorne’s position would be persuaded to abandon her life abroad and travel halfway around the world to bind herself to a sexagenarian if, at the outset of the relationship, she had been made aware of the enormity of the arrangement that was proposed.” [at 75 judgment of Nettle J]”by the time he disclosed to her the terms of the agreement and by the time Ms Harrison (solicitor) had made Ms Thorne understand the purport of them, the circumstances in which Ms Thorne found herself appear so seriously to have affected her state of mind as to have rendered her incapable of making judgment in her own best interest.”[at 76 – judgment of Nettle J]
Gordon J was in dissent, noting that the majority erred in finding that the agreement should be set aside on the basis on undue influence. He agreed with the majority that the agreement should be set aside on the basis of unconscionable conduct. Notably he commented that the two doctrine should be distinguished as follows, citing Mason J’s judgment in Commercial Bank of Australia Ltd V Amadio (1983) 151 CLR 447 at 461:
“for unconscionable conduct “the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which [the innocent party] is placed and of the other party unconscientiously taking advantage of that position.” By contract, for undue influence, “the will of the innocent party is not independent and voluntary because it is overborne.”
If you or your partner are considering entering into a Financial Agreement before or during your relationship, or have entered into these or similar arrangements, and would like advice relevant to your specific circumstances please contact our office to make time to speak with one of our lawyers 9320 3900 or email [email protected].
The information in this blog does not constitute legal or financial planning advice and cannot be relied upon by you. If you require advice specific to your situation you must contact Counsel Family Lawyers for legal advice. The contents of this blog are relevant as at 9 November 2017. We recommend you obtain specific advice relevant to you and your family’s situation.
Written by Sarah Damon