Financial agreements: undue influence, unconscionable dealings and duress

Articles, Commercial Contracts

On 8 November 2017, the High Court handed down its decision in Thorne v Kennedy [2017] HCA 49, providing clarity on the nature and application of the equitable doctrines of undue influence, duress and unconscionable dealings between parties to an agreement.

Facts

The claim was brought by Ms Thorne to set aside two financial agreements under s 90K of the Family Law Act 1975 (Cth) entered into with her husband, Mr Kennedy in circumstances where undue influence, duress and unconscionable dealings had vitiated the agreements.

Mr Kennedy was a 67 year old wealthy property developer with an estimated value of $18 million in assets whilst Ms Thorne, a 36 year old Eastern European woman, owned no substantial assets.  Mr and Mrs Kennedy met through an online dating site and, in 2007, Ms Thorne moved to Australia where the parties intended to marry later that year.

Just weeks prior to the wedding, Mr Kennedy handed Ms Thorne a pre-nuptial agreement, the execution of which was a prerequisite to the ceremony taking place. Contrary to legal advice provided to Ms Thorne, the pre-nuptial agreement was signed by both parties, which was then followed by a subsequent post-nuptial agreement.

Decision

In a joint judgment, their Honours (Kiefel CJ, Bell J, Gageler J, Keane K and Edelman J) upheld the primary judges’ decision to set aside the agreements on the basis that they were vitiated by undue influence and unconscionable conduct. The judgment emphasised that terms which were found to be unfair and unreasonable in pre-nuptial and post-nuptial agreements were relevant considerations of whether an agreement should be set aside.

The High Court also ruled that an indicium of undue influence included circumstances where agreements had been signed despite the party having knowledge that the agreement was grossly unreasonable.

Furthermore, the judgment indicated that in assessing whether certain agreements were vitiated by undue influence, certain factors should be considered,  including: whether the agreement was offered on a 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.

A copy of the High Court’s judgment summary can be found here. For copies of the parties’ written submissions, case chronology and the full judgment, please click here.

For further information, please contact ERA Legal.

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