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Pre-nuptial agreements



What is a Pre-Nuptial Agreement? 

A pre-nuptial agreement is a legally Binding Financial Agreement between two people who are planning on getting married or living together in a de-facto relationship. It determines what happens to your property and assets if the relationship breaks down. 


While it can seem a bit depressing or negative to be thinking about this at what is actually a very happy time in your relationship, it is actually a very sensible and important conversation to have, particularly if: 

  • you or your partner have children and assets from a previous relationship that you want to preserve for any children of this relationship 

  • one person is bringing substantially more property or assets into the relationship than the other 

  • you or your partner have a family business they want to protect. 

 

If you are planning on entering into a pre-nuptial agreement, you and your partner both need independent legal advice for any agreement to be valid. You can't both use the same lawyer to prepare your agreement.  

This is a legal requirement to ensure that your pre-nuptial agreement is just and fair and that the advantages and disadvantages of entering into the agreement are clear to both of you. 

Usually, the person who is bringing the most assets to the relationship initiates the pre-nuptial agreement, drafted by their lawyer, while the other person has their lawyer review the draft agreement. 

A word of warning! Don't leave it until the last minute before the wedding or starting to live together to organise a pre-nuptial agreement. The law reports are full of cases where a party seeks to have the other sign an agreement week or even days before the event. These agreements have often been set aside by the Courts as being unfair or made under undue pressure ('sign - or the wedding is off!'). You need to start this process several months before the wedding or starting a de-facto relationship. 

 

The case of Thorne v Kennedy provides an interesting explanation of pre-nuptial agreements.  

 

Here, the High Court struck down both pre and post nuptial agreements on the basis of undue influence and unconscionable conduct. 

 

The agreements were entered into between a financially challenged 36-year-old woman from overseas and a 67-year-old wealthy Australian property developer. 

 

Before the marriage, an agreement was signed to the effect that the wife would have very little claim on his assets in the event of a separation. 

 

Ms Thorne’s English was poor, she had no assets and she had been persuaded to come to Australia by the property developer.  Her Australian Visa was about to expire. 

 

She had been asked to sign the “pre-nup” 4 days before the wedding, 

 

All of her family were already in Australia, having flown from their country of origin. 

 

She was told that if she didn’t sign the agreement, the marriage wouldn’t go ahead. 

 

The independent solicitor who advised her in relation to both agreements strongly recommended that she didn’t sign. 

 

The couple were divorced just under 4 years later. 

 

At what point does the concept of undue influence come into play with these agreements? 

 

The Court held that it arose where a person has no free will.  Ms Thorn had been unduly influenced by her future husband to the extent that she could not make clear, calm or rational decisions.  

 

The grossly unreasonable nature of the agreement on its own also indicated undue influence. 

 

The second basis on which the agreement was struck down was unconscionable conduct.  This occurs where one party takes advantage of another’s special disadvantage to induce them into entering an agreement which is unfair and harsh.  The other party must be aware of the special disadvantage and unconscientiously take advantage of it. 

 

Both agreements were overturned, and the wife was free to bring a property settlement claim. 

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