2017: A big shake up in Family Law Financial Agreements.
“Let the buyer beware!” An old saying reminding us that when we sign up to a deal we must be prepared to stick to it. The law does not concern itself with buyer’s remorse… or does it?
The times they are a changing!
“I will love you forever, now please sign here!”
One Ms Thorne regretted a financial agreement she signed with Mr Kennedy after coming to Australia to marry him.
They met online in 2006. She was a penniless Eastern European woman, living in the Middle East.
He, a wealthy Australian property developer and divorcee with 3 adult children, agreed to meet her and, if he liked her, they could marry and live in Australia, but she would have to sign papers as his money was for his children.
He travelled overseas twice to spend time with her. They enjoyed holidays in Europe. He met her family and lavished her with expensive gifts.
In February 2007, he brought her to Australia. He set her up in an expensive penthouse. A wedding date was set for September, 2007.
He brought her parents out from Europe for the wedding. But about 10 days before the ceremony he told her that his solicitors had prepared a Prenup agreement dealing with property settlement and other financial matters if they separate. He added that, if she didn’t sign it, the wedding was off.
Politicians pass laws about agreements.
Prenup agreements and financial agreements sorting out financial arrangements between separating couples are regulated by the Family Law Act. Amongst other things, the Act requires independent legal advice.
Lots of agreements are regulated by Parliament. For example, the National Credit Code requires that guarantors of residential and other domestic loans be first given information before they sign.
The purpose is to protect the weaker from the stronger.
Agreements not complying with laws are usually unenforceable. And that is the case with financial agreements between married and de facto couples. Competent family lawyers ensure strict compliance.
The customer knows best??
The agreement dealt with Ms Thorne’s maintenance and living arrangement for her and her extended family while the parties were together and after separation and property settlement following separation. Within 14 days of separation, she would have to move out of the matrimonial home and her family would have to move out of their apartment. Spousal maintenance would cease. If the parties separated within 3 years of marriage, she’d not get anything for property settlement. If after 3 years, and no children, she’d get $50,000.
An accredited family law specialist warned Ms Thorne “It is the worst contract I have ever seen. Don’t sign”.
Nevertheless, after getting advice in compliance with the Family Law Act, Ms Thorne signed up.
They were together for 4 years before Mr Kennedy had had enough and declared the relationship was over.
Ms Thorne’s future looked dismal. She asked the Court to overturn the deal.
As you might guess, Mr Kennedy opposed this.
Judges with differing views.
In the end, 11 judges considered this case. They didn’t all agree.
At first there was a single judge, in the Federal Circuit Court of Australia. Despite Ms Thorne having received competent legal advice, the Judge ruled the financial agreement was void because it would be unconscionable, that is, unfair, to hold her to it. She described the circumstances of Ms Thorne’s agreement:
“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.”
Mr Kennedy then appealed to the Full Court of the Family Court where three judges allowed the appeal, finding that Mr Thorne’s conduct was not unconscionable, that he did not take advantage of Ms Thorne and the financial agreement was binding.
Ms Thorne then successfully appealed to the High Court of Australia where seven judges all agreed that the agreement was unconscionable and should be set aside.
Moral of the story: If the agreement isn’t fair, don’t rely on it.
A rule of thumb is that courts will not interfere in bargains between citizens, even bad bargains. And they will generally enforce compliance with ordinary commercial agreements.
But this case strikes a blow for the disadvantaged, pressured into signing financial agreements. Even if they get the required legal advice and comply with other regulations they may still get the agreement overturned if they can persuade the court it was unconscionable.
The High Court’s ruling is important, not just for Family Lawyers and their clients, but for all who have concerns about unfair agreements. No longer can a stronger party, whether it be a bank or a wealthy prospective husband of an internet bride, rely on the other receiving independent legal advice or having complied with any other procedural rules about the agreement.
So be aware, a clever, tough deal may come unstuck.