One ground on which a Binding Financial Agreement (BFA) can be set aside by a court is if the court is satisfied that there has been "duress". More light has recently been shed on what constitutes duress by the Family Court recently considering that issue in a case known as Kennedy & Thorne.
The property pool when the parties commenced their relationship was in excess of $18 million. The parties met on the internet, with the wife living overseas. The wife moved to Australia and the parties married. The husband had 3 adult children and made it very clear to the wife that he intended to leave his assets to those children. Despite strong advice from her lawyer against signing the BFA, the wife signed one BFA just prior to the wedding and another BFA within a month on the marriage, with that BFA terminating the first BFA.
After the parties separated, the wife initiated Court proceedings seeking that the BFA be found to be non-binding or set aside due to duress and she sought a property settlement of $1,100,000, as well as Spousal Maintenance.
When the matter was decided by the first judge, that judge stated in order to establish duress "there must be pressure the practical effect of which is compulsion or absence of choice" and "duress was born out of the inequality of bargaining power where there was no outcome available to [the wife] that was fair or reasonable".
The trial judge held that the wife had signed the BFA in the context that there was to be no negotiations in regards to the BFA — that she knew that if she did not sign it, then the parties would not marry. The BFA was found to be non-binding due to duress.
However, the Full Court disagreed and declared that the correct test "is whether there is 'threatened or actual unlawful conduct'". The Full Court confirmed that "[t]here needed to be a finding that the 'pressure' was 'illegitimate' or 'unlawful'." The Full court said that an "'inequality of bargaining power' cannot establish duress". The Full Court held that the BFAs were enforceable.
It would seem that this is narrowing the circumstances that will amount to duress
So what are the lessons from this judgement — it makes it even more important that if you are having a BFA you want the circumstances to be very clear so that there is no chance of duress being considered. The best way of avoiding that is to talk to our Family Law team early on 03 5445 1000 if you are thinking about a BFA.