Do prenups have a future?

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Since December 2000, parties to a relationship have been able to enter into what we commonly call a prenup. The intention being that it would be binding on them in the event their relationship came to an end and it would therefore avoid going to the Family Court for a property settlement order.

On 8 November, 2017 the High Court, in the case of Thorne v Kennedy [2017] HCA 49, gave careful consideration to a prenup and a postnup and in both instances determined that the agreements should be set aside on the basis of undue influence and unconscionable conduct.

The circumstances, I think, compelled the expectation that the Court would do what it did. However, there has been commentary to the effect that the judgement signals the death knell of prenups. I think such a view is premature.

The care that we need to take in preparing these documents is, of course, very high but I also think the judgement itself gives some good guidance on the matters that need to be uppermost in a practitioner’s mind when embarking on the effort to provide clients with a binding agreement.

At paragraph 60 of the judgement, in relation to undue influence, the majority identified factors that would play into a consideration of whether undue influence had been applied. They were as follows:

  1. Whether the agreement was offered on a basis that was not subject to negotiation;
  2. The emotional circumstances in which the agreement was entered into, including any explicit or implicit threat to end a marriage or to end an engagement;
  3. Whether there was any time for careful reflection;
  4. The nature of the parties’ relationship;
  5. The relative financial position of the parties;
  6. The independent advice that was received; and
  7. Whether there was time to reflect on that advice.

Earlier on in the majority judgement there was another interesting remark made at paragraph 56 to the effect that – if the prenup or postnup agreement is signed despite being known to be grossly unreasonable even for agreements of this nature – it was some indicia of undue influence.

In summary, Thorne v Kennedy is, I believe, an extremely important case and I’m sure that those involved in preparing prenups will read it with considerable interest. I think that what the Court will be looking at – to determine whether these agreements are valid or not – is signposted in the case to a significant degree.

I commend a reading of it to all involved in this aspect of estate planning.

Dr John de Groot.

A TEST OF WILLS – INFORMAL WILL APPEAL

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On 24 September 2015, I posted a de Groot Report in which I discussed the recent decision of Re Estate of Wai Fun Chan deceased [2015] NSWSC 1107, a case in which a DVD recording was intended to be a codicil to a will. Since that de Groot Report, the Queensland Court of Appeal in Lindsay v McGrath [2015] QCA 206 has, for the first time, considered a case involving an informal will.

The issue was whether a handwritten document satisfied the requirements of s. 18, Succession Act 1981 (Qld). (A copy of the handwritten document is appended to the judgment.)

The document was signed by the deceased but was undated and unwitnessed. The application was dismissed at first instance and the appeal ultimately suffered the same fate. The decision reaffirms the evidentiary difficulties faced by an applicant in persuading the court to use its dispensing power.

I welcome the decision as there have been some suggestions recently that the level of informality which is being accepted by the courts is going or has gone too far.

The difficulty in these cases is where to draw the line. It reminds me of Lord Cranworth’s LC remarks in Boyse v Rossborough where he alluded, in a case involving testamentary capacity, to the difficulty of identify twilight – an allusion to capacity when it is somewhere between daylight (clear capacity) and nighttime (no capacity).

The conundrum has been well illustrated in cases such as Re Yu [2013] QSC 322 which considered whether recordings of bequests on an iPhone satisfied the requirements of s18; Mellino v Wnuk [2013] QSC 336 which dealt with a DVD and Yazbek v Yazbek [2012] NSWSC 594 which dealt with a file left on a computer.

For now, as evidenced by the decision in Lindsay v McGrath, the level of relaxation exhibited by the courts to informal wills seems to be appropriately ‘measured’. I think Justice Boddice’s remarks in Lindsay v McGrath at [60] are worth noting. He said:

“Great care is to be taken in the evaluation of evidence (Fast v Rockman [2013] VSC 18). To satisfy the onus, the evidence must show more than that the particular document sets out the deceased’s testamentary intentions or that it is consistent with other statements the deceased made about what he or she wanted to happen to the property upon death. The evidence must establish on the balance of probabilities that the deceased wanted the particular document to be his or her final Will, and did not want to make any changes to that document (Re Application by Pastro [2014] VSC 221).

Personally, I think recent developments in some of the cases are of concern. They certainly indicate that today there are many more places we need to look for a will. Are things going too far?