In a landmark decision delivered today, the High Court of Australia has provided important guidance on how the equitable doctrines of undue influence and
unconscionable conduct apply in applications to set aside financial agreements under s.90K of the Family Law Act 1975.
The parties to the appeal met on a dating website. The wife, Ms Thorne, then aged 36, moved to Australia to be with Mr Kennedy, a 67-year-old property developer with assets worth between $18 million and $24 million. Mr Kennedy had indicated to Mr Thorne from the outset that he wanted a “paper” and that his money was for his three children from a previous marriage. Ms Thorne did not become aware of the terms of the financial agreements until about 10 days before the wedding, after her family had arrived from overseas, venues booked and dresses made. Mr Kennedy told Ms Thorne that the wedding would be called off if she did not sign the financial agreement.
Ms Thorne signed the agreement, against independent legal advice, just four days before the wedding.
Ms Thorne signed a second agreement about four weeks after the wedding.
The High Court agreed with the finding made by the judge at first instance that the wife had moved to Australia leaving behind "her life and minimal possessions … If the relationship ended, she would have nothing. No job, no visa, no home, no place, no community."
In their joint judgment, Kiefel CJ, Bell J, Gageler J, Keane J and Edelman J found that the agreements were vitiated by both undue influence and unconscionable conduct, and should be set aside on that basis. Some of the relevant factors identified by the majority in assessing whether or not an agreement is vitiated by undue influence include: whether the agreement was offered on the basis that it was not subject to negotiation; the emotional circumstances in which the agreement was entered, including any explicit or implicit threat to end a marriage or to end an engagement; whether there was any time for careful reflection; the nature of the parties' relationship; the relative financial positions of the parties; and the independent advice that was received and whether there was time to reflect on that advice.
Nettle J and Gordon J, in separate judgments, both found that the agreements were vitiated for Mr Kennedy’s unconscionable conduct, with Gordon J expressly disagreeing with the majority’s finding that the doctrine of undue influence was also engaged.
The Court’s decision has been eagerly anticipated by the legal profession, and is of particular relevance to family lawyers and those who practice in equity.