July 10 2024
In our guide on binding financial agreements, we have set out the various elements that need to be in place for a financial agreement to be valid and enforceable.
One question that comes up from time to time is about what happens if one person was “forced” to sign a prenup. Is the binding financial agreement still enforceable? Do you have any options to get out of it?
Well, as you might expect – it depends…
If a Court is satisfied that one party to a binding financial agreement did so under “duress”, the Court will likely be prepared to set aside the agreement.
So the short answer is yes – if you were “forced” to sign the agreement, there is a chance you might be able to set aside the agreement.
That then begs the question: what counts as “duress”, and what factors is the Court going to take into account to try and determine whether you were truly under duress of the type that might warrant setting aside the agreement?
The Courts have recognised the concept of duress in a variety of different areas over many years.
Duress captures the idea that someone is under some kind of unconscionable compulsion by the conduct of another person to do something that they otherwise would not have done.
We’re going to unpack that in a bit more detail in this article, but from the outset we can identify a few things to be aware of.
First, duress is something more than just a slight feeling of pressure.
Next, the conduct of the other person is inherently related to the question.
Finally, lots of factors are going to contribute to the question of whether duress was involved in a decision to sign a binding financial agreement.
Of course, we could look at fanciful and unlikely examples of duress like threat of physical violence, but the best way to illustrate a real-life circumstance of duress is to look at an actual situation.
Here, Ms Thorne (36) and Mr Kennedy (67) (not their real names) met online. Mr Kennedy was really wealthy (assets over $18m or thereabouts), and Ms Thorne was really not (she had no substantial assets). Shortly after they first met online, Mr Kennedy told Ms Thorne that if they married she would “have to sign paper” and that his money was for his children.
Ms Thorne lived overseas at the time, but later flew to Australia intending to marry Mr Kennedy.
About 11 days before the wedding, Mr Kennedy arranged for Ms Thorne to see solicitors to sign an agreement, telling her that if she did not sign it then the wedding would not go ahead.
An independent solicitor told Ms Thorne in no uncertain terms that the agreement was completely one-sided and that she shouldn’t sign it.
Ms Thorne understood the advice, but signed the agreement anyway around 4 days before their wedding.
Ms Thorne and Mr Kennedy subsequently separated, and Ms Thorne sought orders from the Court setting aside the agreement (as an aside, there were actually two agreements, but we’re just simplifying things for this summary).
After a series of decisions and appeals (during which time Mr Kennedy passed away), the High Court found:
So, with that short summary in tow we can now make a few observations about how the Court might go about assessing whether to set aside a financial agreement.
As you might have seen from our summary above, the circumstances opened up a number of related, but slightly different, legal pathways to set aside a financial agreement. Those are:
Strictly these are slightly different things. However, they tend to come up together, because they could all come out of the same facts. For example, in our Thorne v Kennedy summary above, the first judge found “duress” but the final court found “undue influence”.
As a result, we’ll essentially just treat them together here.
As you’d expect, a Court is going to consider any relevant facts or circumstances that it thinks are relevant in deciding whether duress, undue influence or unconscionable conduct have occurred.
There are, however, some factors that will reliably come up.
Presenting a binding financial agreement for someone to “think about” mere days before a wedding will inevitably cause a large amount of pressure. That is compounded further by the delivery being accompanied with a comment that the wedding won’t go ahead if you don’t sign.
By that time, planning has been completed, guests are invited or already travelling, and the imminence of the wedding day is going to add enormous pressure to the person being asked to sign.
The Kennedy agreement was entirely one-sided. Of course, had the terms themselves been more evenly balanced the application to set the agreement aside might not have been brought in the first place.
Beyond that though, most people will not sign a completely unreasonable and unfair document unless there is some kind of significant pressure to do so.
Here, Ms Thorne understood the agreement was bad (and had advice confirming that for her), but believed she had no choice but to enter the agreement, nonetheless.
Ms Thorne was entirely dependant on Mr Kennedy. She had left her home country and flown to Australia to be with him, had no significant assets or ability to look after herself.
Mr Kennedy was a wealthy experienced business person.
The significant difference in their situations offered weight to the idea that Ms Thorne was unduly influenced.
It’s common in questions of undue influence to look at not just the facts of one person, but the dynamic between them. Substantial differences in education, money or experience will all contribute to a perception that there was some kind of undue influence.
The Court will often enquire about how the binding financial agreement was prepared.
Was it drawn up entirely by one party and then simply presented as a “take it or leave it”, or was there a collaborative process?
Anything like threats, coercion, manipulation or conduct that makes one person feel like that don’t really have any choice but to sign the agreement will be taken into account.
There are a couple of interesting things in our case study that are worth mentioning.
The first is the fact that Mr Kennedy actually told Ms Thorne right from the beginning that if they married he didn’t want her to get access to his wealth.
The next is that Ms Thorne did, in fact, receive appropriate independent legal advice about the agreement (of course if she hadn’t the agreement wouldn’t have been binding because it didn’t meet the formal requirements).
Ultimately, however, these factors did not weigh heavily enough against the others to change the outcome.
We mention this because some people think that getting independent legal advice eliminates the possibility that you might sign an agreement under undue influence or duress. Here we see that’s not the case, and that even with independent advice a person can still be inappropriately forced to sign up to a binding financial agreement.
If you are concerned that you signed up to a binding financial agreement under duress, undue influence or unconscionable conduct then get in touch with us to get advice on your options.
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