KIEFEL CJ, BELL, GAGELER, KEANE, NETTLE, GORDON AND EDELMAN JJ
THORNE APPELLANT
AND
KENNEDY RESPONDENT
Thorne v Kennedy
[2017] HCA 49
8 November 2017
B14/2017
ORDER
1.Appeal allowed.
2.Set aside the orders of the Full Court of the Family Court of Australia made on 26 September 2016 and, in their place, order that the appeal to that Court be dismissed with costs.
3.The respondent pay the appellant's costs of the appeal to this Court.
On appeal from the Family Court of Australia
Representation
M J Foley with P J Woods for the appellant (instructed by Somerville Laundry Lomax)
R G Lethbridge SC with G C Eldershaw and D Birch for the respondent (instructed by Jones Mitchell Lawyers)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Thorne v Kennedy
Family law – Financial agreements – Family Law Act1975 (Cth), Pt VIIIA – Pre-nuptial agreement – Post-nuptial agreement – Where fiancé wealthy – Where fiancée had no substantial assets – Where fiancée moved to Australia for purposes of marriage – Where fiancée had no community or connections in Australia – Where fiancée relied on fiancé for all things – Where pre-nuptial agreement provided to fiancée shortly before wedding – Where fiancé told fiancée that if she did not sign agreement wedding would not go ahead – Where independent solicitor advised fiancée against signing – Where pre-nuptial agreement signed – Where substantially identical post-nuptial agreement signed – Whether agreements voidable for duress, undue influence, or unconscionable conduct – Whether primary judge's reasons adequate.
KIEFEL CJ, BELL, GAGELER, KEANE AND EDELMAN JJ. This appeal concerns two substantially identical financial agreements, a pre-nuptial agreement and a post-nuptial agreement which replaced it, made under Pt VIIIA of the Family Law Act1975 (Cth). The agreements were made between a wealthy property developer, Mr Kennedy, and his fiancée, Ms Thorne. The parties met online on a website for potential brides and they were soon engaged. In the words of the primary judge, Ms Thorne came 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"[1]. The pre-nuptial agreement was signed, at the insistence of Mr Kennedy, very shortly before the wedding in circumstances in which Ms Thorne was given emphatic independent legal advice that the agreement was "entirely inappropriate" and that Ms Thorne should not sign it.
One of the issues before the primary judge, Judge Demack, was whether the agreements were voidable for duress, undue influence, or unconscionable conduct. The primary judge found that Ms Thorne's…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Thorne v Kennedy [2017] HCA 49
Case
[2017] HCA 49
Decision Date
CaseChat Overview and Summary
The High Court of Australia heard an appeal concerning financial agreements made between Ms Thorne and Mr Kennedy. Ms Thorne, a woman with no substantial assets, moved to Australia to marry Mr Kennedy, a wealthy property developer. Shortly before their wedding, Ms Thorne was presented with a pre-nuptial agreement, which she was told she must sign for the wedding to proceed. Despite receiving advice from an independent solicitor that the agreement was highly unfavourable, Ms Thorne signed it. A substantially identical post-nuptial agreement was signed later. Ms Thorne sought to have these agreements set aside.
The central legal issues before the High Court were whether the financial agreements were voidable due to duress, undue influence, or unconscionable conduct. The Court was also required to consider whether the primary judge's reasons for finding the agreements voidable were adequate.
The High Court allowed the appeal, finding that the agreements were not voidable. The Court reasoned that while Ms Thorne was in a position of vulnerability and received poor independent legal advice, the circumstances did not amount to duress or undue influence. The Court emphasised that the pressure exerted by Mr Kennedy, while significant, did not rise to the level of illegitimate pressure that would vitiate the agreement. The Court also noted that Ms Thorne had the option to refuse to sign and that the wedding would not proceed, which was a choice she ultimately made by signing. The Court found that the primary judge's reasoning, which focused heavily on Ms Thorne's lack of agency and the unconscionable outcome, did not adequately address the specific legal requirements for establishing duress or undue influence.
The High Court set aside the orders of the Full Court of the Family Court of Australia and ordered that the appeal to that Court be dismissed with costs. The respondent was ordered to pay the appellant's costs of the appeal to the High Court.
Orders
Orders of the court
1. Appeal allowed.
2. Set aside the orders of the Full Court of the Family Court of Australia made on 26 September 2016 and, in their place, order that the appeal to that Court be dismissed with costs.
3. The respondent pay the appellant's costs of the appeal to this Court.
Background
Background to the litigation
The names, and some details, of the parties were suppressed during the course of this litigation. That approach was generally followed on this appeal, including the use of pseudonyms to describe the parties. Background The parties met over the internet in 2006. At the time, Ms Thorne, who was an Eastern European woman, was living in the Middle East. She was 36 years old. She had no substantial assets. She previously had been married and divorced and was subsequently in a four year de facto relationship which ended when her partner moved to Kuwait for work. Mr Kennedy was a 67 year old Greek Australian property developer. He had assets worth between $18 million and $24 million. He was divorced with three adult children. Ms Thorne's profile on the website on which they met described her as a single woman with no children, of the Greek Orthodox religion, who spoke a little English and Greek. She shared the same religion with Mr Kennedy and generally conversed with him in Greek. Mr Kennedy travelled overseas to meet Ms Thorne very shortly after meeting her online. He told her that if he liked her then he would marry her but that "you will have to sign paper. My money is for my children"[2]. [2]Thorne & Kennedy [2015] FCCA 484 at [33]. During their courtship phase, Mr Kennedy travelled overseas twice to meet Ms Thorne. He took her on an extended holiday around Europe, during which he met her family. He bought her expensive jewellery. In February 2007, about seven months after Mr Kennedy and Ms Thorne met, they moved to Australia to live in Mr Kennedy's expensive penthouse with the intention of getting married. The wedding between Ms Thorne and Mr Kennedy was set for 30 September 2007. On 8 August 2007, Mr Kennedy had instructed a solicitor to prepare a pre-nuptial agreement. It is unclear whether Ms Thorne was, at this time, aware of the agreement but she was certainly not aware of its contents. Around 19 September 2007, Mr Kennedy told Ms Thorne that they were going to see solicitors about the signing of an agreement. Ms Thorne asked Mr Kennedy whether he required her to sign the agreement. He replied that if she did not sign it then the wedding would not go ahead. On 20 September 2007, Mr Kennedy took Ms Thorne and her sister to see an independent solicitor, Ms Harrison, who was an accredited family law specialist. Mr Kennedy waited in the car outside. It was during this appointment that Ms Thorne first became aware of the contents of the agreement. By this time, Ms Thorne's parents and sister had been flown to Australia from Eastern Europe and accommodated for the wedding by Mr Kennedy. Guests had been invited to the wedding. Ms Thorne's dress had been made. The wedding reception had been booked. The day after the meeting, Ms Harrison produced a written advice to Ms Thorne which she subsequently explained to Ms Thorne. There was no dispute that Ms Harrison's advice was accurate. Some of the key features of Ms Harrison's advice were as follows:(1)The agreement provided for Ms Thorne to receive maintenance during the marriage of the greater of (i) $4,000 per month or (ii) 25% of the net income from the management rights of a proposed development. Ms Harrison observed that the $4,000 per month contained no provision for increase and was a very poor provision from someone in Mr Kennedy's circumstances. (2)Ms Thorne would be permitted to live rent free in a penthouse located in the proposed development and her family would be permitted to live rent free in a unit located in that development. Ms Harrison noted, however, that Ms Thorne had informed her that the local council had refused planning permission for the proposed development. (3)If Ms Thorne and Mr Kennedy separated within the first three years of marriage, with or without children, then Ms Thorne would get nothing. The rights described above would also cease.(4)If Ms Thorne and Mr Kennedy separated after three years, without children, Mr Kennedy would only have an obligation to pay a single lump sum of $50,000 to Ms Thorne. This payment was indexed to the Consumer Price Index if the separation occurred after 1 July 2011. Ms Harrison described this amount as "piteously small". (5)If Mr Kennedy died while they were living together and while they had not separated then the agreement provided that Ms Thorne would be entitled to (i) a penthouse in the proposed development or, if that were not possible, a unit she chose in the same city not exceeding a market value of $1.5 million; (ii) 40% of the net income of the management rights of the proposed development or $5,000 per month, indexed annually, whichever was the greater; and (iii) the Mercedes Benz car that was presently in her possession or a replacement vehicle of the same or higher value.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
KIEFEL CJ, BELL, GAGELER, KEANE AND EDELMAN JJ
NETTLE J
(dissent)
GORDON J
Related to the fact finding advantage of the trial judge is the evaluative nature of the judgment involved in determining whether the vitiating factors have been established. For example, in undue influence there will be questions of evaluative judgment involved in assessing whether the extent to which a person's will has been subordinated to another's is sufficient to characterise the person as lacking free will. The same evaluative exercise was described by this Court in Kakavas v Crown Melbourne Ltd[74] in relation to unconscionable conduct, quoting from Dixon CJ, McTiernan and Kitto JJ in a passage from Jenyns v Public Curator (Q)[75] which emphasised how the application of these equitable principles:"calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [other party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition. Indeed no better illustration could be found of Lord Stowell's generalisation concerning the administration of equity: 'A court of law works its way to short issues, and confines its views to them. 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'". [74](2013) 250 CLR 392 at 426 [122]. See also at 401 [18].[75](1953) 90 CLR 113 at 118-119; [1953] HCA 2.The primary judge's decision The primary judge posed the hypothetical question of why Ms Thorne would sign an agreement when she understood the advice of her solicitor to be that the agreement was the worst that the solicitor had ever seen[76]. The primary judge also asked why, despite the advice of her solicitor, Ms Thorne failed to conceive of the notion that Mr Kennedy might end the marriage. The primary judge found that the answer to these questions did not lie in Ms Thorne's lack of proficiency in English. Instead, the primary judge attributed Ms Thorne's beliefs and actions to matters of duress or undue influence. [76]Thorne & Kennedy [2015] FCCA 484 at [85]. The primary judge described duress as "a form of unconscionable conduct"[77]. This description was not subsuming the vitiating factor of duress within the doctrine of unconscionable transactions, which would require a finding of special disadvantage and an unconscientious taking advantage of that special disadvantage. Her Honour was using "unconscionable" in the sense described by Gaudron, McHugh, Gummow and Hayne JJ in Garcia v National Australia Bank Ltd[78] as "to characterise the result rather than to identify the reasoning that leads to the application of that description". [77]Thorne & Kennedy [2015] FCCA 484 at [68]. [78](1998) 194 CLR 395 at 409 [34]. The critical findings of the primary judge concerning duress and undue influence were based primarily upon Ms Thorne's evidence. Although the primary judge described Mr Kennedy's evidence as having "many difficulties"[79], she had no such concerns about Ms Thorne's evidence. The primary judge concluded that Ms Thorne was powerless to make any decision other than to sign the first agreement. The primary judge referred to an inequality of bargaining power and a lack of any outcome for Ms Thorne that was "fair or reasonable"[80]. However, her Honour also explained that Ms Thorne's situation was "much more than inequality of financial position"[81]. [79]Thorne & Kennedy [2015] FCCA 484 at [23].[80]Thorne & Kennedy [2015] FCCA 484 at [94].[81]Thorne & Kennedy [2015] FCCA 484 at [93].
Ratio Decidendi
Legal Principle Established
Established by:
KIEFEL CJ, BELL, GAGELER, KEANE AND EDELMAN JJ,
GORDON J