Good Faith Properties Ltd v Cibean Development Co. Ltd
Court of Appeal
Civil Appeal No. 35 of 2014
Lam V-P, Barma and McWalters JJA
Land Law
22 September 2014

Land law – compulsory sale for redevelopment – contested application – costs – compensation approach applied

X obtained an order for the compulsory sale of a building under the Land (Compulsory Sale for Redevelopment) Ordinance (Cap. 545) (the “LCSRO”). In awarding certain costs against R, a minority owner who had opposed the application, the Lands Tribunal (the “Tribunal”) rejected the compensation approach (applied in compulsory acquisition cases) and adopted a modified form of the “costs follow the event” approach. R appealed. At issue was whether the compensation approach as to costs applied to cases under the LCSRO. The ordinance provided for two safeguards: first, the majority owner must hold at least 90 percent of the interest in the land and adduce evidence to satisfy the statutory criteria under s. 4(2); and, if satisfied, second, the minority owner would have to sell his property, but would receive a fair share of the sale proceeds on a pro rata apportionment determined by the Tribunal.

Held, allowing the appeal and remitting the matter to the Tribunal to determine the question of costs based on the compensation approach, that:

  • The LCSRO was a statutory compromise balancing the competing interests of the majority owner in utilising the property by releasing the land for redevelopment and the minority owner in the disposal of his property. The first-tier safeguard aimed to ensure that the minority owner’s right of private ownership of property was not overridden without the Tribunal being satisfied in the statutory process that there was sufficient justification to satisfy the statutory criteria.
  • Under the compensation approach in cases of compulsory acquisition of land by the government or public authorities, a successful claimant was entitled to the reasonable and necessary expenses of determining the amount of the disputed compensation. As a matter of principle, this must be correct in view of art. 105 of the Basic Law. A substantial depletion of compensation by costs of the process (which could not be regarded as unreasonably incurred) would not give the owner whose land was taken the real value of the property.
  • In principle, there was no valid reason why the compensation approach should not apply equally to LCSRO proceedings. Inter alia, despite differences in the inherent nature and special features of LCSRO proceedings and resumption proceedings, given that the deprivation of private ownership without fair and reasonable compensation was an infringement of the minority owner’s constitutional right, the principle of equivalence was engaged in both cases, notwithstanding the absence of specific provisions providing that the applicant shall bear the minority owner’s reasonable costs such as under the Lands Resumption Ordinance (Cap. 124).
  • In both situations, the minority owner did not wish to dispose of his property and the principle that he who caused the litigation should pay for it applied. As for the wider scope of LCSRO proceedings in terms of the onus on the applicant to satisfy the Tribunal of the statutory criteria, the right of the minority owner to raise objections was an important element of the process, which legitimised and justified the Tribunal’s interference with his constitutional right of private ownership.
  • Here, given the statutory regime, the Tribunal erred as a matter of law in rejecting the compensation approach; drawing a distinction between unsuccessful minority owners who put the applicant to strict proof and those who advanced positive grounds of opposition; and holding that the latter was unreasonable and should attract costs consequences. It also gave insufficient consideration to the constitutionally entrenched right of private ownership and the principle of equivalence.

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