In December 2020, the High Court handed down judgment in the case of Kleinhentz v Harrison & White. The dispute related to a London property which sold for over £1.2m in 2015. The Claimant contended that he had been entitled to a share of the sale proceeds, though he was not a legal owner of the property.
According to the judge, Mr Thain-Michel Kleinhentz and Mr Mark Harrison had lived together in a committed relationship for many years. Their relationship began in 1990 and continued until at least 2005. At some point between 2005 and 2008, the commitment ended and their relationship evolved into one which was more like good friends.
One of the properties that Thain and Mark lived in together during the course of their relationship was a London property called Margravine Gardens. Mark had purchased this property in his sole name in 2002. The purchase price was £550,000. The purchase funds were provided by Mark's father (being the proceeds of sale of another property in Comeragh Road, which had been funded by Mark's father, together with a further gift from Mark's father).
By 2011, the relationship between Mark and Thain had broken down. Mark asked Thain to move out of Margravine Gardens. As a result, Thain instructed solicitors, claiming a share in the equity of that property. A settlement agreement was entered into, under which Thain would receive a payment of £250,000 and would withdraw his claim for a share in the equity of Margravine Gardens. The payment was stated to be conditional on Mark receiving "unmonitored or controlled funds" from his father, or his "inheritance" from his father, whichever was earlier.
In 2015, Mark sold Margravine Gardens for just over £1.2m.
Mark did not pay any money to Thain under the terms of the settlement agreement, asserting that none of the conditions had been satisfied. Thain, on the other hand, argued that the conditions were satisfied when Mark received the proceeds of sale of Margravine Gardens, as Mark's father had effectively provided all of the purchase funds for Margravine Gardens. So, Thain argued that Mark was reneging on the agreement. In the alternative, Thain argued that a common intention constructive trust had arisen in his favour. The law on common intention constructive trusts is discussed in more detail in our previous article Legal battle between unmarried couple over £8m property portfolio determined by the High Court.
The judge rejected Thain's claim. His reasons included the following:
- The evidence did not show a common intention on Mark's part that Thain should have a share in the equity of Margravine Gardens. At most, Mark had intended that Thain would be given a share in the equity after Mark's father's death and not any immediate interest. Therefore, a common intention constructive trust could not have arisen in Thain's favour.
- Even if a common intention had existed, Thain had not suffered sufficient detrimental reliance for the purposes of establishing a common intention constructive trust. Detrimental reliance is discussed in more detail in our previous article, Can I bring a claim against my ex-partner for a share of the property's equity?
- The natural meaning of the words used in the settlement agreement was that Thain would receive £250,000 if, and only if, Mark received future funds from his father. Had it been agreed that the payment should be made if Mark were to receive funds from the sale of Margravine Gardens, that would have been made clear in the settlement agreement. Moreover, the fact that Mark was expecting to receive significant funds from his father and that he had discussed this with Thain was strong evidence that the judge's interpretation of the settlement agreement was the correct one.
The case confirms that settlement agreements should be drafted very carefully. If the wording is unclear, this will increase the likelihood of costly and time-consuming litigation. Birketts is well placed to assist you with the drafting and the interpretation of such agreements.
The case also confirms that, if you are not the legal owner of a property, it can be very difficult to establish that you have a share in the equity/ sale proceeds. Merely living together in a committed relationship and contributing to the household bills is unlikely to be sufficient, even if your partner has assured you that the property is "yours too". Birketts is well placed to advise you on your legal rights and options if you are thinking of cohabiting; if you already live with another person; or if you think your relationship might be coming to an end.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.