Adverse possession by co-owner in breach of DMC

In Foremost Hill Ltd v Li Hon ([2017] HKEC 708) P and D owned adjoining shops in a building covered by a Deed of Mutual Covenant (‘DMC’). P had been in possession of part of D’s shop (‘the disputed area’) since 1981 (possibly earlier) due to a wrongly positioned partition wall. P claimed to have acquired title to the disputed area by adverse possession. The court agreed.

There was a clear ouster; P’s actions were incompatible with D’s right to exclusive occupation of the disputed area.

D also relied on the DMC covenant provisions conferring on each owner a right to the exclusive use of its own unit. Andrew Chung J commented that this effectively raised the question as to whether adverse possession can ever operate as between co-owners of units covered by a DMC ([25]).

The matter seemed not be covered by authority and should be approached from first principles.

An action to enforce the DMC term as a contractual term was time-barred after six years (section 4(1) of the Limitation Ordinance).

There was no limitation period for an action to enforce a restrictive covenant in equity but the doctrine of laches applies. The adverse possession began so long ago that it would be inequitable to allow D to enforce the covenant against P.

Andrew Chung J. also agreed with the proposition that since the action was, in substance, an action to recover land the limitation period in section 7(2) is engaged ([37]).

Michael Lower

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