Hyde v Pearce

A purchaser allowed into possession under a contract for sale may acquire title by adverse possession only if the possession has in fact become adverse. A right to seek possession is not, by itself, sufficient. The court must examine the quality and legal basis of the possession, including the parties’ conduct and the continuing status of the contract.

Where the purchaser entered and remained in possession as purchaser, continued to rely on the contract, and never clearly repudiated it, the possession remains referable to the contract rather than being adverse. The purchaser cannot retain the benefit of possession obtained under the contract and later rely retrospectively on limitation by asserting that the possession was adverse throughout.

Mr Hyde contracted at auction in 1958 to purchase 138 Clouds Hill Road and adjoining land. He entered into possession after receiving the keys under arrangements which made his licence determinable on demand. A dispute then arose over a small piece of land included in the contract and the amount of the appropriate abatement. The vendors demanded return of the keys, but the contract continued and neither side rescinded it.

Mr Hyde remained in occupation. In 1972 the vendors sold the property to Mr Pearce, whose conveyance over-reached Hyde’s unregistered contractual rights. After Pearce obtained possession, Hyde claimed title by adverse possession under the Limitation Act 1939. The High Court gave judgment in Hyde’s favour. The central issue on appeal was whether Hyde’s possession had become adverse despite the subsisting contract and his continuing reliance on it.

1. Appeal allowed. The High Court’s order concerning title was quashed. Mr Pearce was declared entitled to the fee simple absolute in possession, free of all legal or equitable interests. The order concerning the chattels remained undisturbed.
2. Lord Justice Templeman held that the 1953 Law Society’s Condition 6 was modified by Hyde’s undertaking to return the keys on demand. Hyde therefore occupied as a licensee whose licence could be determined by the vendors on demand. The vendors validly purported to determine that licence in 1958.
3. That conclusion did not establish adverse possession. Section 10 of the Limitation Act 1939 required possession in whose favour the limitation period could run. The relevant question was the quality of Hyde’s possession, not merely whether the vendors had a right of action for possession.
4. Hyde entered and remained as a purchaser under a subsisting contract. The correspondence, the vendors’ continued treatment of him as a purchaser pending completion, the absence of rescission, the unresolved abatement dispute, and Hyde’s pleadings and conduct all showed that his possession remained referable to the contract. His equitable interest as purchaser also differentiated him from a stranger or squatter.
5. The vendors’ September 1958 letter was equivocal about immediate possession and instead pursued arbitration and completion. In the circumstances, possession could not fairly be treated retrospectively as adverse merely because the vendors might have brought proceedings. Hyde had relied on the contract to obtain and retain possession and had never clearly repudiated it. If he had expressly repudiated the contract and changed the quality of his possession, different considerations might have arisen.
6. Lord Justice Ackner agreed. He emphasised that Hyde’s correspondence and particulars treated his continued occupation as arising from the contract, and that possession during the relevant period would have been defensible in proceedings for possession. Lord Justice Cumming-Bruce likewise treated the pleadings as strong evidence of the true character of the possession. The declaration was made upon the respondent’s solicitors undertaking to vacate the caution. Costs below remained unchanged, and the formal costs directions were otherwise made as recorded.

• Court of Appeal: Allowed the appeal, quashed the High Court’s order concerning title, and declared Mr Pearce entitled to the fee simple absolute in possession.
• High Court, Queen’s Bench Division, Bristol District Registry: Judge Fallen, Q.C., had given judgment in favour of Mr Hyde on his claim to title by adverse possession. The judgment was appealed.