Posts Tagged ‘co-owners’

Adverse possession by co-owner in breach of DMC

April 10, 2017

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

Creation of a Chinese customary trust. Adverse possession as between co-owners

September 5, 2013

In Tang Tak Sum v Tang Kai Fong ([2013] HKEC 1159, CFI) the first question was whether certain land in the New Territories was subject to a Chinese customary trust. It was held that it was not since no positive steps had been taken to establish such a trust and  there had been no transfer of land to such a trust. No managers had ever been appointed under section 15 of the New Territories Ordinance. Thus, the terms of a 1939 Division of Family document stating that the land was to be ancestral worship property were not effective. This conclusion was confirmed by the fact that the four sons of the person who had created the Division of Family had, on their father’s death, had themselves registered as tenants in common of the land under the now-repealed section 17 of the New Territories Ordinance ([59]).

Alternatively, even if the Division of Family had taken effect, the trust created was ended by the registration as tenants in common since this registration had priority over Chinese customary law ([67]). Further, this registration amounted to agreement by all the heads of the family for the purposes of Chinese customary law that the trust was to end ([74]). Alternatively, the registration as tenants in common was a valid basis for estoppel by convention to operate (the common assumption being that the land was not subject to an ancestral trust ([76] – [88]).

The plaintiffs claimed the quarter share due to them and even having failed to establish the existence of a Chinese customary trust, they would still be entitled to this as successors of one of the original tenants in common. The defendants had, however, collected the rent from the property without accounting to the plaintiffs for 31 years. This was held to be an ouster and, having continued for more than 20 years, it allowed the defendants to defeat the plaintiff’s title by adverse possession.

Michael Lower

When is one co-owner who collected rent liable to account to the other?

November 24, 2011

Where one co-owner collects rents the mere fact of being co-owners does not give rise to a liability to account to the other co-owner(s). A liability to account to the other for the latter’s share arises where the former is the agent or bailiff of the latter. It can also arise in partition actions (or actions that are equivalent), administration actions, in other cases where there is a fund in court, where the court makes an order for sale as an alternative to partition or where one party claims an interest under a resulting or constructive trust and the court is asked to quantify that interest (paras. 103 – 105).

Where one co-owner collects the other’s share of rent, it is possible to imply an agency. It is also possible (depending on the context) that this agent holds the rents collected on a ‘real’ constructive trust so that there is no limitation period in respect of the claim by the agent for the rents received (see Limitation Ordinance, s. 20).

In Chen Yu Tsui v Tong Kui Kwong ([2005] HKEC 1679, CA) property was held by two brothers as tenants in common in equal shares. One brother (the defendant) collected all the rents and after a time stopped accounting to the other (the plaintiff’s deceased husband) for his share of the rents. The plaintiff brought an action to recover the rents. It was held that there was a duty to account in this case  since the defendant had impliedly acted as his brother’s agent (paras. 111 – 112). The action was not time-barred. This was a ‘real’ constructive trust to which section 20(1) of the Limitation ordinance applied (para. 123).

Michael Lower