Where a covenantee with knowledge of conduct inconsistent with the terms of the covenant acquiesces in that conduct for many years then it can lose its right to enforce the covenant.
In Attorney General of Hong Kong v Fairfax Ltd ( HKLRD 243) F was the owner of part of the land (Inland Lot 757) comprised in a government lease. The lease prohibited the building of anything other than ‘villa residences’. Since 1957 a number of multi-storey buildings had been erected on other parts of Lot 757. It was now ‘a high density, high-rise area of apartment blocks’ (per Lord Browne-Wilkinson). Nevertheless, the Crown objected when F sought to build a high-rise apartment building on its land. It demanded a premium to release the covenant. The Privy Council agreed with Hong Kong’s Court of Appeal that the covenant had been abandoned because the Crown had for forty years allowed developments inconsistent with the covenant. Given the location and extent of the inconsistent construction the onus was on the Crown to show that it did not know of the breaches. The Crown could not conceivably argue that it was unaware of them.