De Muller & Anor v Harrison-Morgan

A claimant seeking recovery of money must establish the legal basis on which the defendant is said to hold it. A party’s entitlement to a share of profits under an agreement with another person does not make particular payments by a third party part of that share. Where an occupier agrees to give vacant possession in return for payment, the agreement is supported by consideration; the adequacy of that consideration is not generally examined. Legal professional privilege may be waived where a party discloses specific legal advice and acts or proposed courses of action based on it. Fairness may then require disclosure of the underlying advice so that the court is not given only a partial account.

The claimants, acting as administrators of the estate of Rainer Christian Kahrmann, sought recovery of approximately £2.2 million paid to the defendant on the sale of two enfranchised properties. They alleged that the deceased had been entitled to half the sale profits under an agreement with a business associate and that the defendant had received money which should have been paid to the estate.

The estate also claimed delivery up of furniture and artwork removed from one property. The defendant counterclaimed for a share of the proceeds of another property and repayment of approximately £200,000 allegedly advanced to the deceased. The court determined the parties’ contractual and proprietary rights, the effect of the payment to the defendant, the chattels claim and the counterclaim.

1. Privilege. Applying D (A Child) [2011] EWCA Civ 684, the court held that privilege had been waived where the evidence identified specific legal advice, a claim said to be available and a possible course of legal action. Fairness required disclosure of the attendance note because the advice might have been broader or qualified, and nondisclosure risked presenting only a partial picture. The distinction between referring to the effect of advice and revealing its substance, discussed in Marubeni Corporation v Alafouzos, did not alter that conclusion.
2. The deceased’s arrangements with Mr Hawkins gave the estate a right to claim half the net profit from the sale of the properties. They did not create a constructive trust of the properties for the estate. The deceased’s interests had been assigned, and the parties’ operative arrangement was a profit-sharing agreement.
3. The payment to the defendant was made by the purchaser in return for her agreement to vacate and provide vacant possession. That was consideration, even if her legal right to remain was uncertain. The law did not inquire into the adequacy of the consideration. The estate’s contractual claim, if any, lay against Mr Hawkins and did not deprive the defendant of her separate contractual entitlement.
4. The estate’s claim for the £2.2 million was dismissed. Its claim for the chattels succeeded except for items 9, 19 and 37. The counterclaim was dismissed. The court did not decide whether Mr Hawkins had breached the profit-sharing agreement.