KWOK CHEUK KIN AND ANOTHER v. DIRECTOR OF LANDS AND OTHERS

CACV 234/2019

CACV 317/2019

CACV 319/2019

[2021] HKCA 54

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 234, 317 AND 319 OF 2019

(ON APPEAL FROM HCAL NO. 260 OF 2015)

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JUDGMENT
Hon Poon CJHC (giving the Judgment of the Court):

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1.  Article 40 of the Basic Law (“BL40”) stipulates:

“The lawful traditional rights and interests of the indigenous inhabitants of the ‘New Territories’ (‘NTIIs’) shall be protected by the Hong Kong Special Administrative Region.”

2.  In these appeals arising from the judgment of Chow J dated 8 April 2019,[1] it falls to this Court to determine the constitutionality of the New Territories Small House Policy (“Small House Policy”).  As accepted by the respondents and the interested party and found by the learned Judge, the Small House Policy is inherently discriminatory on the grounds of social origin or birth and sex in contravention of articles 25 and 39 of the Basic Law (“BL25” and “BL39”) and article 22 of the Hong Kong Bill of Rights (“BOR22”).  The crux of the appeals is whether it nevertheless falls within the NTIIs’ lawful traditional rights and interests in BL40,[2] thus being rendered lawful and constitutional.

A.     Small House Policy

3.  The Small House Policy was approved by the then Executive Council on 14 November 1972[3] and has been implemented since December of the same year to date.  Over the years, the details of the Small House Policy had been modified and changed from time to time.  The parties have all along proceeded on the basis that the Small House Policy as it now stands is in substance the same as approved in 1972 and the subsequent modifications or changes do not have any material impact on the issues before the courts.

4.  The current Small House Policy is contained in a pamphlet dated December 2014 published by the Lands Department (“Pamphlet”) and explained in details in the 2^nd affirmation of Chow Man Yee, Assistant Director (Estate Management) of the Lands Department, filed in the proceedings below on 5 June 2017 (“CMY2nd”).  Under the Small House Policy, an indigenous villager in the New Territories may apply for permission to erect, for once in his lifetime, a small house on a suitable site within his own village[4] upon meeting the following criteria:[5]

(1)     the applicant is an indigenous villager who is a male person at least 18 years old and descended through the male line from a resident in 1898 of a recognized village;[6]

(2)     the applicant has not previously received any small house grant;

(3)     the site applied for is within the “V” Zone[7] and the environs or the village extension area of a recognized village;[8]

(4)     the site applied for is not affected by any impending development, and does not prejudice any future planning or development proposals; and

(5)     there are no substantiated local objections to the proposed building.

5.  A small house grants take three forms: (a) free building licence (on private land); (b) private treaty grant (on Government land); and (c) land exchange (surrender and re-grant).[9]  In the case of application for free building licence or exchange, the land under application must be registered in the applicant’s name.[10]

6.  An administrative fee will be levied from small house grants.  A premium at a concessionary rate calculated by Government will also be charged by reference to the form of grants used.[11] Currently, the premium payable is:[12]

(1)     for free building licence on land owned by the applicant himself, the premium is nil;

(2)     for private treaty grant of Government land, the premium is set at a concessionary rate of about 2/3 of the full market rate; and

(3)     for exchange, the premium is nil for the private land owned by the applicant and at a concessionary rate for the Government land portion, subject to a minimum premium of HK$1,000 where no additional Government land is required.

7.  Applications for small house grants on Government land from villagers living overseas will be refused unless the District Lands Officer is satisfied that the applicant intends to return and reside in his village.  The District Lands Officer may however consider overseas applications for small house grants on private land.[13]

8.  An application for a small house site outside the applicant’s own “Heung” will not be considered, unless he can prove to the satisfaction of the District Lands Officer that his ancestor has already settled in the new “Heung” under application, and there are no local objections to his application.[14]

9.  As described in the Pamphlet,[15] a small house is basically a building in the New Territories constructed in accordance with the provisions of the Buildings Ordinance (Application to the New Territories) Ordinance (“BO(ANT)O”).[16]  Its main features are that the building shall neither contain more than three storeys nor exceed a height of 8.23 metres (27 ft.) and the maximum roof-over area of the house shall not exceed 65.03 square metres (700 sq. ft.).  Under the BO(ANT)O, a certificate of exemption in respect of building works should be obtained from the District Lands Officer prior to the commencement of any building works unless plans prepared by an authorized person have been approved by the Building Authority.  The owner should also apply for separate certificates of exemption for site formation works and drainage works from the District Lands Officer and shall not commence any works on site before obtaining the necessary certificates of exemption, or securing approval of plans by the Building Authority.

10.  Since 1972, the Government has introduced various measures to enhance the Small House Policy, including the requirement of non-alienation and requirement of statutory declaration of ownership.[17]

11.  Over the years, the rights of a male New Territories indigenous villager to apply for permission of a small house grant under the Small House Policy has been commonly referred to as “the Ding Rights”,[18] which we will adopt for easy reference in this Judgment.

B.     Proceedings below

12.  In the judicial review proceedings below, the applicants challenged the constitutionality of the Small House Policy on three grounds.  First, it discriminates against persons of “non-indigenous” status in contravention of BL25, BL39 and/or BOR22.  Second, the Small House Policy and the relevant exemption in the Sex Discrimination Ordinance (“SDO”)[19] discriminate against female indigenous villagers based on sex, in contravention of BL25, BL39 and/or BOR22.  Third, the Government has failed in its duty to manage, use or develop land in Hong Kong for the benefit of all Hong Kong residents, in contravention of article 7 of the Basic Law (“BL7”).

13.  The respondents and the interested party invoked BL40.  They argued that the Ding Rights are lawful traditional rights and interests within the meaning of BL40, thus renders the Small House Policy constitutional and lawful.

14.  In his very careful and thorough judgment, the Judge found that the Small House Policy is discriminatory based on social origin/birth and/or sex in contravention of BL25 and BOR22 in the absence of any justification attempted by the respondents or the interested party satisfying the proportionality test.[20]  The real question is whether the Small House Policy is rendered lawful by BL40.[21]

15.  Turning to BL40, the Judge identified four constituent elements which have to be satisfied before protection is given, namely, (1) there are some rights and interests; (2) those rights and interests are lawful; (3) those rights and interests are traditional; and (4) they are rights and interests of the NTIIs.[22]  On the 1^st element, the Judge noted the difference between the respondents and the interested party as regards the precise rights or interests which might be enjoyed by the New Territories indigenous villagers to build small houses, but found that it was not necessary to resolve the difference in this case.  He said he would focus on the Ding Rights which he considered could properly be regarded as “rights or interests” capable of being protected by BL40.[23]  On the 4^th element, the Judge observed that those who were qualified to benefit under the Small House Policy could clearly be regarded as falling within the expression “NTIIs” in BL40.[24]  He therefore concluded that the real issues were whether the Ding Rights could satisfy the “traditional” and “lawful” elements in BL40.[25]

16.  The Judge outlined the parties’ respective contentions as follows:

“41. There is a difference of views between the [respondents] and the [interested party] in relation to the meaning or effect of the words ‘traditional’ and ‘lawful’ in BL40. The [respondents’] position is that:

(1)     ‘lawful’ and ‘traditional’ are two distinct concepts and the drafters of the Basic Law intended that in order for a right to be protected, it has to be both ‘lawful’ and ‘traditional’;

(2)     in terms of ‘traditional’ rights and interests, they are confined to those traceable to the rights and interests of the New Territories indigenous inhabitants before the commencement of the New Territories Lease in 1898;

(3)     ‘lawful’ means lawful according to the domestic law of Hong Kong on 1 July 1997 and not inconsistent with the Basic Law; and

(4)     a different way of putting the concept of ‘lawful traditional rights and interests’ is that it refers to what remained as at 1 July 1997 of the rights and interests enjoyed by the New Territories indigenous inhabitants prior to the commencement of the New Territories Lease and was given recognition by the colonial administration.

  42.     On the other hand, the [interested party’s] position is that:

(1)     ‘lawful traditional rights and interests’ refer to the rights and interests enjoyed by the New Territories indigenous inhabitants prior to the commencement of the Basic Law and at the time of the Basic Law’s drafting, and BL 40 is not concerned with the state of affairs in 1898 but the state of affairs immediately prior to the coming into force of the Basic Law;

(2)     ‘lawful’ does not mean that BL 40 is restricting the nature of the ‘traditional rights and interests’ which are protected by allowing them to be challenged under other legal principles; rather BL 40, as a provision within the category of ‘Fundamental Rights and Duties of the Residents’ contained in Chapter III of the Basic Law, means that ‘traditional rights and interests’ have been recognised as lawful prior to the Basic Law and continue to be valid under the Basic Law; and

(3)     in his oral submissions, Lord Pannick further explains that the word ‘lawful’ is merely descriptive of those traditional rights and interests which were enjoyed by the New Territories indigenous inhabitants immediately prior to the commencement of the Basic Law.

  43.     In so far as the [applicants] are concerned:

(1)     in relation to the ‘traditional’ element, they agree with the [respondents’] proposition mentioned in paragraph 41(2) above; and

(2)     in relation to the ‘lawful’ element, they contend that ‘lawful’ means lawful both according to Qing law before the New Territories Lease in 1898 and according to the domestic laws of Hong Kong in 1997, and not inconsistent with the Basic Law.”

17.  Noting that there is no definition or further explanation of the expression “tradition” in the Basic Law, and after going through the drafting materials for the purpose of identifying the purpose of BL40, the Judge agreed with the respondents’ submission that “traditional” rights and interests of the NTIIs which are protected by BL40 are confined to those traceable to the rights and interests of the NTIIs before the commencement of the New Territories Lease, that is the Second Convention of Peking,[26] in 1898.  Such rights and interests do not include those practices which only came into being afterwards unless they are traceable to the previous rights and interests of the NTIIs.[27]  He noted that the word “traceable” does not appear in the Basic Law and he only used it for the purpose of elucidating the concept of “traditional” as used in BL40.  He considered that a right or interest can properly be regarded as “traceable” if it captures or reproduces the essential feature(s) of a right or interest that was enjoyed by the NTIIs before the commencement of the New Territories Lease.[28]

18.  The Judge went through the tracing exercise concerning land holding and land administration in the New Territories,[29] beginning with land tenure before the New Territories Lease, continuing with the New Territories Lease and the Proclamations and speeches by the Governor, Sir Henry Blake, in 1898 and 1899; the change of land holding from common/customary tenure to Crown lease; land sale in village areas in the New Territories before 1972 including public auction, private treaty, and restricted village auction.

19.  The Judge then discussed the history of free building licence[30] and concluded that the Ding Rights in the form of free building licence could be properly regarded as a traceable right for the purpose of BL40.[31]  However, he rejected the submission that private treaty grant or exchange could be properly so regarded.[32]

20.  Turning to the “lawful” element in BL40, the Judge held that the purpose of BL40 is to protect or preserve those rights and interests of the NTIIs which could properly be regarded as their “traditional” rights and interests after 1 July 1997.  It was clear that at the time of the drafting of the Basic Law, some such rights or interests might be open to objection on the ground that they were discriminatory in nature.  It would not be consistent with the purpose of BL40 to allow such rights or interests to be challenged on the ground of discrimination or other grounds of unlawfulness.[33]   He accordingly accepted the respondents’ submission that “lawful” means lawful according to the domestic law of Hong Kong on 1 July 1997 and not inconsistent with the Basic Law.  He rejected the applicants’ submission that “lawful” in BL40 means lawful according to both Qing Law before the New Territories Lease and the domestic laws of Hong Kong after 1997.  He was not convinced that the drafters of the Basic Law would be concerned with the state of lawfulness, or legality, of the traditional rights and interests of the NTIIs under Qing Law before 1898.  He accepted the interested party’s submission that “lawful” in context is merely descriptive of those traditional rights and interests which were enjoyed by the NTIIs prior to the commencement of the Basic Law[34], but disagreed with it as regards the time frame that such rights or interests had to be enjoyed by the NTIIs in order for them to come within the scope of BL40.

21.  In conclusion, the Judge held that of the three forms of land grant under the Small House Policy, only free building licence could be properly regarded as a lawful traditional right or interest of the NTIIs, but private treaty grant and exchange could not be so regarded as they do not satisfy the tracing exercise he propounded for determining if they are traditional for the purpose of BL40.  He held that the Small House Policy to the extent that it confers benefits on eligible NTIIs in the form of free building licence is constitutional and lawful but not to the extent that it confers benefits in the form of private treaty grant or exchange.[35]

22.  In light of his conclusion on the constitutionality of the Small House Policy, the Judge found it unnecessary to deal with the applicants’ challenge on BL7.[36]

23.  Lastly, for the reasons that he gave, the Judge rejected the submissions of the respondents and the interested party that relief should be refused and the judicial review should be dismissed because of the applicants’ lack of standing and the substantial and unexplained delay in bringing the application.[37]

24.  After receiving further submissions on relief, the Judge on 30 April 2019 made, among other things, the following orders:

(1)     A declaration that the Small House Policy is unconstitutional and contrary to BL25 and BOR22 insofar, and only insofar, as it permits eligible New Territories indigenous villagers under that policy to:

(i)     be granted Government land by way of private treaty grant at a concessionary premium for the purposes of building a small house of a regulated size on such land; and

(ii)     exchange private land for Government land at a reduced or nil premium to build a small house of a regulated size on such land.

(2)     A declaration that Schedule 5, Part 2, Paragraph 2 of the SDO is unconstitutional and contrary to BL25 and BOR22 insofar, and only insofar, as it creates an exemption for discrimination under Part 4 of the SDO arising from the components of the Small House Policy declared unconstitutional as above.

C.     Appeals

25.  All the parties appealed.[38]

C1.    Overview of the parties’ submissions

26.  In substance, the parties repeated their same submissions advanced before the Judge with some refinements.

27.  Mr Martin Lee SC,[39] for the applicants, complained that the Judge erred in not holding that the entire Small House Policy had not been rendered lawful by BL40 which only protects lawful traditional rights and interests of NTIIs, that is, rights and interests which are not against the laws of Hong Kong, including the Basic Law, in particular, BL25 and BOR22.  They further contended that in any event free building licence is not a lawful traditional right or interest under BL40 for three reasons. First, “lawful” refers to differential treatment which is justified, and therefore does not infringe BL25 and BOR22.  Second, the Ding Rights are not “rights or interests” as the Small House Policy only confers a right to apply under a completely discretionary government policy.  Third, the Ding Rights are not “traditional” in that they are not traceable to pre-1898.  The free building licence under the Small House Policy has nothing in common with what existed pre-1898, save that the licence is free.[40]

28.  Mr Benjamin Yu SC[41] for the respondents and Lord Pannick QC[42] for the interested party contended that the entirety of the Ding Rights of NTIIs under the Small House Policy are protected under BL40.  The Judge erred in concluding that BL40 only protects grants under the Small House Policy by way of free building licence but not private treaty grant or exchange.

29.  The respondents argued that private treaty grant is lawful as it is part of a well-publicized administrative policy protected and recognized by Hong Kong law.  Further, the Basic Law, including BL25, BL39, BL40 and article 122 of the Basic Law (“BL122”), must be read together congruously.  The objective pre-enactment materials also show the drafters of the Basic Law had discussed the issue and resolved to entrench the rights and interests of the NTIIs notwithstanding that those rights may be discriminatory.  Consequently, the Small House Policy and indeed the private treaty grant cannot be regarded as unlawful because of its discriminatory nature.  Private treaty grant is traditional as the rights and interests thereunder are traceable back to, in that they capture or reproduce the essential features of, the rights and interests enjoyed by villagers before the British took the New Territories Lease in 1898.  Alternatively, there can be no doubt that one of the objects and purposes of BL40 was the protection of lawful and traditional rights and interests of the NTIIs, and that the rights and interests of the NTIIs under the Small House Policy was, at the time when BL40 was drafted, objectively regarded as one of the lawful and traditional rights and interests of the NTIIs.  For exchange, the respondents argued that it is an administrative instrument to overcome practical difficulties faced by an eligible NTII and a means to give effect to the rights and interests under free building licence, which the Judge had declared to be constitutional.  It was therefore wrong for him to have declared it unconstitutional or required it to pass the four constituent elements of BL40 separately.

30.  The interested party argued that “the lawful and traditional rights and interests of the NTIIs” under BL40 refer to the rights and interests enjoyed by them at the time when the Basic Law was drafted and prior to its coming into force in 1997.  The term is descriptive.  The entirety of the Small House Policy, inclusive of private treaty grant and exchange, was entitled to mandatory protection under BL40. This is supported by the theme of continuity after resumption of sovereignty enshrined in the Basic Law generally, and for BL40 specifically.  BL40 is not concerned with the state of affairs in 1898.  The Judge erred in concluding that it was necessary to engage in a historical tracing exercise to determine whether the relevant right or interest captured or reproduced the essential feature of a right or interest enjoyed by the NTIIs prior to the New Territories Lease in 1898.  Having regard to the theme of continuity, the admissible extrinsic materials, and BL122, there is no support for the view that the Basic Law intended to constitutionally enshrine free building licence but not private treaty grant and exchange under BL40.  On the contrary, the plain intent was to provide for mandatory protection for all forms of land grant under the Small House Policy.  The interested party further argued that even on his own interpretation of BL40, the Judge erred in concluding that private treaty grant was not a protected form of land grant under BL40.  The Judge ought to have concluded that, on the evidence, the essential feature of private treaty grant, namely, the right or interest to acquire land for building a house, was traceable to those enjoyed by the NTIIs before 1898.  The Judge likewise erred in declaring exchange unconstitutional.  It should be regarded as a derivate of free building licence or alternatively an administrative practice to give effect to free building licence or private treaty grant which satisfies the requirements of BL40 or does not need itself to do so.

31.  Both the respondents and the interested party complained that the Judge erred in not refusing relief and dismissing the judicial review on the basis of the serious and unexplained delay and the applicants’ lack of standing.

C2.    Two main issues

32.  Arising from the parties’ contentions, are two main issues.  First, as already alluded to at the outset, concerning the constitutionality of the Small House Policy, the issue is whether, on a proper construction, the Ding Rights are “lawful traditional rights and interests of the NTIIs” in BL40?  (Construction Issue).  Second, even if the Small House Policy, whether wholly or partially, were found to be unconstitutional, should relief be refused on lack of standing and delay?  (Relief Issue).  We will deal with them in Parts D and E respectively.

D.     Construction Issue

D1.    Factual context of BL40

33.  As is now well settled, the courts adopt a contextual and purposive approach in construing a provision of the Basic Law: Ng Ka Ling & Others v Director of Immigration (1999) 2 HKCFAR 4 at pp.28-29; Director of Immigration v Chong Fung Yuen (2001) 4 HKCFAR 211 at p.224D-G; Vallejos v Commissioner of Registration (2013) 16 HKCFAR 45 at [76]-[77]; Comilang Milagros Tecson v Director of Immigration (2019) 22 HKCFAR 59 at [60].  The context and purpose of a provision of the Basic Law were established at the time when it was enacted in 1990.  The materials for identifying them include other provisions of the Basic Law as well as other relevant extrinsic materials including the Joint Declaration, the state of the legislation at or about the time of the Joint Declaration and the enactment of the Basic Law and other pre-enactment materials brought into existence prior to or contemporaneous with the enactment of the Basic Law.

34.  Here, BL40 concerns lawful traditional rights and interests of NTIIs.  Since tradition by definition has its origin from the past and is passed on through generations, a historical survey going back to the time of the New Territories Lease is necessary to ascertain the rather special factual context in which BL40 was written.  When it is properly understood against such a historical context, how BL40 came into being in the manner that it did in April 1990 and the purpose that it aims to achieve will become apparent.  A total of twelve contextual matters, taken broadly in a chronological order, are identified below.

(i)      Status of NTIIs originated from 1898

35.  The concept of an inhabitant of Hong Kong as an NTII only came into existence in 1898.  The term “New Territories” was itself first used by the Colonial Government to describe the territory in the San On District leased to the British Government under the New Territories Lease.[43] The reason is obvious.  As compared with the rest of the Colony, which was ceded to the British Government under the Treaty of Nanking 1842,[44] the leased territory was “new” from the perspective of the British Administration and the Colonial Government.  With that in mind, the term “NTII” must have been used to distinguish the inhabitants then residing in the leased territory, now known as the “New Territories”, from the rest of the Hong Kong population.  When time passes, the term also includes the descendants of the first generation of NTIIs.  In short, NTII as a status has its origin in 1898.

(ii)      Stated intention to respect customs and usages

36.  It was the stated intention of the Colonial Government in the early days of the New Territories to respect the customs and usages of its inhabitants.  This is seen from the Governor’s Proclamation of 9 April 1899 (“the Second Proclamation”):

“I would also impress upon you that this territory having been leased by His Imperial Majesty the Emperor of China to Her Britannic Majesty the Queen, as subjects of Her Majesty’s Empire, your commercial and landed interests will be safeguarded, and that your usages and good customs will not in any way be interfered with.”

Similarly, in his speech given on the hoisting of the Flag on 17 April 1899, the Governor said:

“… From this day of hoisting the flag you and your families and your property come under British protection…You may carry on your lawful occupations and your buying and selling unobstructed. Your ancestral temples and your temples for worshipping your gods will remain.

… In all the villages we will establish schools, and you will be protected in your rights…”

(iii)      Recognition of importance of descent in the male line

37.  The Colonial Government had recognized in the early days of the New Territories that “[in] the New Territories as elsewhere continuous decent in the male line is the paramount object in the life of the Chinese, and the necessity for this is the foundation for many of their habits and customs”.[45]

(iv)      But always subject to law

38.  Such intention and recognition of the Colonial Government were necessarily subject to a very important caveat.  As much the Colonial Government might have intended to respect the customs and usages of the New Territories, the Governor’s Proclamations did not have any effect or force in law: Winfat Enterprises (HK) Co Ltd v Attorney General [1984] HKLR 32, at pp.43-44, per Roberts CJ.  A fortiori, his speeches.  Such intention and recognition must be subject to the general laws applicable to the whole of Hong Kong, including the New Territories.

(v)     General laws applicable in the New Territories

39.  The New Territories, now as part of the Colony, was subject to all laws and ordinances in force in the Colony.  By the Governor’s Proclamation of 8 April 1899 made pursuant to the New Territories Order-in-Council dated 20 October 1898 (“the First Proclamation”), it was directed that from the 17^th day of that month, all laws and ordinances in force in the Colony of Hong Kong should take effect in the New Territories also, and should remain in force there until they were altered or repealed.  However, even in 1898, the Colonial Government had already found it expedient to exempt the New Territories from the operation of certain ordinances owing to local conditions and variation.  As a result, the New Territories was exempted from the operation of a handful of ordinances.[46]  Those exemptions however did not include land title and administration.

(vi)     New system of land holding in the New Territories

40.  From its early days, the Colonial Government had taken active steps to swiftly introduce a new system of land holding in the New Territories, which was fundamentally different from the one in the pre-Colonial era.

41.  The Judge summarized the previous land holding system at [60] – [66] of the Judgment, quoting the first instance judgment in Winfat Enterprises (HK) Co Ltd v Attorney General [1983] HKLR 211 and Lord Diplock’s judgment when the case reached the Privy Council in [1985] 1 AC 733 at p.744H.  In essence:

(1)     Most land (other than land used for public purpose) in the late 19^th Century China was held on “common tenure”.  Such land could be acquired by inheritance, by purchase and by cultivation of unoccupied or waste land.  With a very few specific exceptions, there appeared to have been no limitations on the use of land held under common tenure.  Land held under common tenure was a perpetual interest, heritable and assignable and subject to no restriction upon building on the land.

(2)     Alongside the common tenure system, land in the New Territories had for many years before 1898 been held under the “customary tenure” based on custom or traditions.  That system was based on the notional division of the land into “Subsoil” and “Topsoil”. As summarized by the Judge:[47]

“(a) The Subsoil land-owner would be the lessee who paid land tax to the Imperial authorities. He owned the land for which he paid tax and was also regarded as the owner of the surrounding land until he came up against land under the control of the next land tax-payer. The boundaries would usually be some easily recognizable natural features (such as a river or mountain spur).

(b) The Topsoil land-owner would be the lessee of the Subsoil land-owner, and pay a fixed and unchangeable annual rent to the Subsoil land-owner. Such lease would be perpetual, hereditable and partible. The Subsoil land-owner would grant to the Topsoil land-owner the absolute right to till the soil, control all the wastes within the area leased, build houses, make bricks for self-use or for small-scale sale, cut fuel, reclaim land, hunt and fish, bury the dead, and so forth. The Subsoil land-owner’s rights over the land after he had leased it to the Topsoil land-owner were very restricted. His interest would essentially lie only in the rent-charge payable by the Topsoil land-owner.

(c) Since both the Subsoil land-owner’s lease with the Imperial authorities, and the Topsoil land-owner’s lease with the Subsoil land-owner, were perpetual and hereditable, such lease would usually be held upon a customary trust, such as a clan ancestral trust or a family trust of various kinds. An individual village family would normally hold their land by way of a customary perpetual (sub-)lease from the Topsoil land-owner for the use of the land.

(d) In practice, the land in a village community would come under the control of the village elders who made all important decisions on behalf of the village community about farming, building houses and other aspects of village life without any external input or control. For at least some two centuries before 1898, there had been a strong belief amongst villagers that they had the absolute right to do so without seeking the consent of any external authority, be it the Imperial authorities or the Subsoil land-owner.

(e) If a villager wished to build a house for himself or his son, he would apply for permission to do so from the village elders and would act in accordance with the rules set by the village community as to where and how the house might be built. The village elders would have the power to give consent or reject the application.

(f) An outsider would generally not be permitted to purchase a house or land in another village.  Outsiders wishing to do so would in any event be rare.  For that to happen, approval to join the village would have to be sought and obtained from the village community and, if approved, he would have to undergo the rituals of ‘Entering the Register’ (入籍), which were expensive, and forsake his old village.

(g) Traditionally, women could not inherit village land, whether arable or house-land, or houses.”

42.  The new land holding system to be introduced by the Colonial Government took a series of steps: 

(1)     As noted by Roberts CJ in Winfat Enterprises (CA), supra, at p.38C-D, in the dispatch sent to the Governor on 6 January 1899, the Secretary of State, among other matters, directed the Governor to publish the New Territories Order-in-Council as soon as possible and emphasized the need to deal with the land question promptly.

(2)     In the Second Proclamation, the Governor impressed upon the inhabitants of the New Territories that:

“It will be necessary for you to register without delay your titles for the land occupied by you, that the true owners may be known.”

(3)     The Colonial Government divided the New Territories into districts and sub-districts and appointed “Committee-men”, made up of village elders, to co-operate with the Government in regulating the local affairs of the villages.  The Government also set up Land Office (with branches at Taipo and Ping-shan) to secure the registration of the owners of cultivated land in the New Territories with a view to preparing a Crown Rent Roll.

(4)     In the Proclamation of 12 July 1899 (“the Third Proclamation”), the Governor informed the inhabitants of the New Territories the procedure which the Government intended to adopt in connection with the registration of land and the amount of land tax that would be charged.  All land owners were warned to register all the land in their possession, failing which the land would be treated as Government land.  A survey would shortly be made of the whole of the New Territories.

(5)     In his speeches given on 2 and 4 August 1899 to the “Committee-men” at Taipo and Ping-shan, the Governor reiterated his appeal that all occupiers must now register with the Land Officer without delay.

(6)     As mentioned in the Third Proclamation, in parallel to and complementing the task of registering all privately owned land and, in the process, resolving the land questions and disputes, Government tasked certain Indian surveyors to carry out cadastral survey between the end of November 1899 and early May 1903.  Cadastral maps were prepared showing the positon and area of individual holdings in the New Territories.

43.  All those steps cumulated in the enactment of three New Territories (Land Court) Ordinances in 1900 (Nos. 4, 8 and 18 of 1900).[48] In particular, section 15 of No. 18 of 1900, which came into force on 23 July 1900, stipulated that:

“All land in the New Territories is hereby declared to be the property of the Crown during the term specified in [the Second Peking Convention], and all persons in occupation of any such land, after such date as may be fixed by the Governor by notification in the Gazette, either generally or in respect of any specific place, village, or district, shall be deemed trespassers as against the Crown, unless such occupation is authorized by grant from the Crown or by other title allowed by the court under this ordinance, or by licence …”

44.  The said Ordinances also set up the Land Court to hear, determine and settle land claims in the New Territories: see section 14 of No. 8 of 1900.[49] As decided by the Land Court, the New Territories was divided into 477 Demarcation Districts which were in turn divided into Blocks, with a Block Crown Lease executed by the Governor and issued for each Block.  Each Block Crown Lease contained a Schedule detailing the separate ownership of the properties, the lot number allocated to each piece of land, the user to which the land was put at the date of the survey and the amount of Crown rent payable at that time.  Block Crown Leases up to 354,277 lots were issued.  These lots are now commonly referred to as “Old Schedule lots”.  Unoccupied land was vested in the Crown.  Generally speaking, a Block Crown Lease would contain provisions or covenants restricting building on agricultural and garden land.  The unclaimed and unoccupied lands in the New Territories were then available for disposal by the Colonial Government at public auction.  Those lots sold by public auction were described and now commonly known as “New Grant lots”.  They were sold subject to standard sets of conditions published in the Gazette from time to time.

45.  In 1910, the New Territories Ordinance[50] was enacted to consolidate and amend the laws relating to the administration and regulation of the New Territories.  Section 14 repeated section 15 of No. 18 of 1990.  Relevantly, section 25 provided that in any proceedings in the Supreme Court in relation to land in the New Territories, the court shall have power to recognize and enforce any Chinese customs or customary rights affecting such land unless the Governor were to exempt the land from the provisions of the Ordinance under section 13(3).[51]  The applicable Chinese customary law is the law of the Qing dynasty as modified by customs.[52]

46.  In sum, under the land holding system now established by the Colonial Government in the New Territories, from 23 July 1900 onwards, all land in the New Territories became vested in the Colonial Government and all persons occupying land from that date became trespassers unless they were authorized by grant, title or licence. Occupied lands were held subject to Block Crown Leases.  Unoccupied lands, now vested in the Government, could be sold by public auction under New Grants. Other than the general land laws, the court had the power to recognize and enforce any Chinese customary law affecting land in the New Territories unless exempted by the Governor.  In applying the applicable Chinese customary law, the court consulted the law predated the Colonial era, namely, the Qing law.[53]

47.  Once the new land holding system was established, the former system practiced in the New Territories before the Colonial-era had come to an end.  The legal position is well summarized by Lord Diplock in Winfat Enterprise (PC), supra, at p.745A-C:

“When the New Territories were ceded, the land became on 1 July 1898 the property of the British Crown for the 99-year period of the cession. It was declared to be so by the Land Court (New Territories) Ordinance 1900 (No. 8 of 1900). For the common or customary Chinese tenure under which the inhabitants had previously occupied their land there was substituted by that Ordinance a leasehold interest of 99 years less three days which, for reasons which do not appear in the evidence, took the form of an initial term of 75 years from 1 July 1898 which was automatically renewable for a further term of 24 years less three days. The leasehold interest in particular parcels of land in the New Territories was granted by incorporating them in the schedules of individual Block Crown Leases which identified their location and area and described the use to which they were put in July 1898. This was generally agricultural or garden ground - and such was the case with all the parcels with which this appeal is concerned. Land so described and scheduled to a Block Crown Lease was subject to an express covenant by the leaseholder not to use the land for building purposes other than for the proper occupation of the land as agricultural or garden ground and no building or structure of any kind could be erected on the land without the approval of the Crown Surveyor.”

(vii)    General policy with regard to small houses before 1972

48.  The Colonial Government’s general policy with regard to small houses in the New Territories before 1972 is outlined in CMY2nd at [26] – [46].  The source documents consist of a number of documents of the Executive Council: the memorandum on Land Conversion in the New Territories, XCC 27 dated 2 April 1957 (“the 1957 ExCo Memo”); the minutes of the meetings in October 1959; the memorandum on Land Administration Policy, XCR 343/59 dated 15 October 1959 (“the 1959 ExCo Memo”); the memorandum on Land Conversion in the New Territories, XCR 217/60 dated 24 June 1960; the memorandum on Village Houses in the New Territories, XCR (67)62 dated 17 February 1967 (“the 1967 ExCo Memo”); and a memorandum from the District Commissioner to the Colonial Secretary on Small Houses in the New Territories dated 18 September 1971.  A useful short summary of the general policy on small houses before 1972 can be found in an internal Government paper entitled “The New Territories Small House Policy” prepared by the NTA Headquarters in February 1980 (“the 1980 Paper”).

49.  In Chapter I of the 1980 Paper on the background of the New Territories Small House Policy, it was recorded:

“Since the beginning of the lease of the New Territories the custom of the villagers to build houses in their village for their own occupation and on their own agricultural land held under the Block Crown Lease issued in 1905, free of premium, has been recognised. This tradition was officially endorsed by Executive Council in October, 1959. On approval of the Council in June, 1960 the concession of a conversion at nil premium was extended to cover also the pre-war New Grant Lots (i.e. agricultural land granted after the issue of the Block Crown Lease). The concession which was granted either by way of Free Building Licence or a surrender/regrant at nil premium was restricted only to villagers in the New Territories and enabled heads of families to build for each son upon marriage a house within the village areas provided there were no ‘fung shui’ or planning objections.

…

While the background of village houses on Old Schedule/pre-war New Grant agricultural lots by way of free conversions, i.e. free building licences or Surrender/regrant at nil premium has been examined as above, in order to provide a full picture of the background to the present New Territories Small House Policy, at this stage it is necessary to trace the history of another form of permission to allow the building of village houses in the New Territories. This originally took the form of a Village Auction (sometimes known as a closed village auction or restricted village auction) of sites on Crown Land until December, 1972, when it was replaced by a system of private treaty grants.

The private treaty grant of leases of up to 1,000 square feet of land for building village houses in the rural areas of the New Territories was approved by the Secretary of State as early as 1909.  However, this authority was not generally utilised after the War and up to 1972 when the Small House Policy was introduced.  Instead Crown land suitable for village house development was disposed of by a system of village auction.  These sites were normally limited to inside or within the immediate environs of villages; that is, within the established village layout.  Applications for such auction sales of sites outside village layouts were not entertained.  The policy was intended to facilitate the separation of a genuine application for a village house from an application for a site for rural residential development on terms envisaging low density and open competition.  For this reason, these auctions were restricted to villagers whose domestic housing needs had to be established.  In practice, there was rarely an alternative bid to that of the applicant; hence the auctions amounted to private treaty grants in all but name.  This very reason, coupled by the intention to simplify the administrative procedure in order to speed up the granting of village house sites granted on Crown land, justified the replacement of the village auction system by a new system of private treaty grants when the New Territories Small House Policy was introduced in December, 1972.”

50.  Two points are made abundantly clear.

51.  First, the NTIIs’ long-held custom to build houses in their village for their own occupation on their own land held under the Block Crown Lease since 1898, described as a tradition, had been recognized and was officially endorsed by the Colonial Government in 1959.  Indeed, in Enclosure 2 attached to the 1957 ExCo Memo, it was stated at [1]:

“At the different stages of N.T. development five different needs have motivated policy decisions affecting the conversion of agricultural land:

(a) the need for control;

(b) the need to finance the construction of streets, drains and other services contingent on urban development;

(c)     the need to honour our undertakings towards the country people;

(d)     the need to encourage development in suitable areas;

(e)     the need to confiscate or at least tax the surplus value of developed land.”

Relevantly, in connection with “the need to honour our undertakings towards the country people”, Enclosure 2 went on to note at [2] that:

“We have said many times that the grantees of old schedule lots and their descendants are not required to pay premium for conversion of their agricultural land to build traditional village houses for their own occupation; and although in town layout areas this ‘right’ (which derive simply from the fact that the Chinese Government, who provided no services, also charged … only a land tax; and did not exercise any control on buildings beyond charging increased land tax) has become modified, and in New Kowloon it has never been recognised at all, elsewhere it has been treated for soon long as ‘entrenched’ that it would now be dangerous to deny it.”

52.  The same emphasis on recognition of such custom of the NTIIs was expressed in the 1967 Exco Memo at the outset thus:

“Since the beginning of the lease of the New Territories there has been a tacit agreement that the villagers be allowed to build houses for their own occupation on their own agricultural land held under the block Crown Lease, free of premium.”

53.  It would appear that the recognition of such custom of the NTIIs was derived from the Colonial Government’s stated intention of respecting their customs and usages in the early days of the New Territories: see [36] above.

54.  Second, such recognition of the NTIIs’ long-held custom to build houses for their own occupation was put into practice by the Colonial Government granting permission to build village houses by way of free building licences; surrender/re-grant; and private treaty grant when applied.

55.  As can be seen from the 1959 ExCo Memo, the then arrangements for disposal of land in the New Territories included, among others, private treaty grants of existing areas to existing lots, private treaty grants of new lots; and exchanges.  Further, as recorded in the minutes of the Executive Council meeting of 6 October 1959, the Government ordered that the present practice whereby all private treaty grants and sales were referred to Council be continued.

56.  In connection with exchanges, the then practice said to be based on the policy approved by the Executive Council in April 1957 was set out at [4] of the 1957 ExCo Memo.  In short, the practice was:[54]

(1)     For New Grant lots, no conversion unless building will be in accordance with the general development policy in the area and with the current layout plan, if any.  Where conversion is permitted, the applicant will be required either to surrender land equal or approximately equal in value to the increased value of the area to be converted, and/or to pay a premium for the increased value, such premium being equal to (or less than) the full difference between the estimated agricultural and building value of the land, depending on the need to encourage rapid development in the area.

(2)     For Old Schedule lots,

(i)     A bona fide villager will in general be permitted, subject to planning and fung-shui considerations, to build a village-type house for his own occupation, and such permission (by building licence) will be free of premium;

(ii)     Any other conversion, as for New Grant lots, but without requiring the applicant to surrender any land;

(iii)    If the applicant so desires however, he may meet part or all of the charges for conversion by the surrender of agricultural land.

The term “conversion” did not accurately describe the process.[55]  Nevertheless, it covered both exchange (surrender/re-grant) for New Grant lots and free building licence for Old Schedule lots.

57.  The undisputed evidence is that land exchange or surrender and re-grant was a practical way of overcoming common difficulties encountered by the NTIIs trying to apply for free building licences.  Typically, an NTII who owned a plot of land, which was not large enough or of a shape not suitable for constructing a small house might, in an appropriate case, apply to surrender his land in exchange for a plot of land which includes his original plot of land or part thereof and the adjoining Government land, on which he could construct a small house.[56]

58.  To cope with village expansion, the 1957 policy of charging nil premium for conversion was extended from Old Schedule lots to the pre-war New Grant lots in June 1960.[57]  It covered village houses with a roofed-over area of up to 700 sq ft and not exceeding a height limitation of 15 ft, provided that they were built in village areas and that there were no “feng shui” or planning objections.  In February 1967, the policy was further extended to cover houses with a roofed-area not exceeding 1,000 sq ft up to a maximum height of 25 ft, provided that the house was genuinely needed for the expanding family needs of a villager.  That would be granted only in cases where villagers wished to construct houses within traditional village areas or in natural extensions to those when no suitable land was available with them: see the second page of the minutes of the Executive Council meeting of 28 February 1967 attached to the 1967 ExCo Memo.

59.  With regard to private treaty grant, the 1980 Paper mentioned that it had its origin back in 1909 at least.  It also mentioned the auction system practiced over the years.  This requires some elaboration.

60.  As said, unclaimed and unoccupied land in the New Territories were now vested in the Crown and could be disposed of by the Colonial Government.  From either 1901 or 1904,[58] land in the New Territories were sold by public auction.  The upset price at those auctions was set at a concessionary rate.

61.  On 26 November 1908, the then Land Officers wrote to the Governor recommending the sanction of the Secretary of State for the Colonies to sell land in the New Territories by private treaty instead of by auction.  He reasoned, among others, that applications for small building lots received by the Land Officer were all small lots suitable only for a Chinese dwelling and mostly adjoining other houses in a village; that there was never any competition at the auctions and no interest was taken in the same except by the applicant who put forward the request for sale and the lot was therefore knocked down at the upset price, which was very low; and that it was not a financially worthy exercise.  In making the recommendation, the Land Officer stated that:

“The sales without auction should be limited to bona fide applications for Chinese occupation and should not be recommended when there was a likelihood of much development in the neighbourhood.”

62.  The Governor then took up the matter with the Secretary of State.  He wrote that in each case of sale by private treaty, the Land Officer should certify that to the best of his knowledge there was no probability of any competition at the sale and that the applicant (ie the purchaser) was the only person interested.  On 22 January 1909, the Secretary gave his approval on the conditions that: (a) only building lots not exceeding 1,000 sq ft or agricultural lots not exceeding 1/8 of an acre could be sold by private treaty; (b) such sale were limited to bona fide applications from Chinese for their own occupation in place where there was not a likelihood of much development in the neighbourhood; and (c) the system of sale by private treaty was not extended to New Kowloon, etc which should continue to be sold by auction.

63.  Sales by way of private treaty continued since about 1909 until a few years after World War II when public auctions were re-introduced.

64.  Soon afterwards, in the 1950s a practice of restricted auctions developed.  As explained in CMY2nd at [37]:

“(a) No centralized register or written instructions concerning the restricted village auctions has been kept so there is no systematic record of such auctions.

(b) Such restricted village auctions were common in the New Territories between the late 1950s and 1971 where New Territories District Officers sold house lots to villagers in their respective villages by this method.

(c) A restricted village auction was on the face of it a public auction although in actual fact it was only restricted to villagers.

(d) The restricted participation was achieved by administrative procedures such as (i) restricting circulation of the relevant information (for instance by posting notice only in the village concerned and not announcing the auction in the Government Gazette) (ii) holding the auction within the village concerned, normally in the village office or the village school (iii) withdrawing the lot if there were non-villagers bidding.

(e)     The villagers themselves would sort out amongst themselves who would bid for the lots in question such that in actual fact there would only be one bidder for each lot.”

65.  The system of restricted village auction ended with the introduction of the Small House Policy in 1972.  The use of private treaty grants to make small house grants was intended to replace restricted village auctions as they were effectively private treaty grants in all but name.[59]

66.  In short, land in the village areas in the New Territories were sold by way of:

(1)     public auctions from around 1901 or 1904 to 1909;

(2)     public treaty grants from around 1909 to a few years after World War II;

(3)     restricted village auctions from the 1950s to 1972; and

(4)     private treaty grants since 1972.

67.  In sum, before 1972, the Colonial Government had all along recognized and accepted the NTIIs’ custom, derived from the pre-Colonial era, to build village houses for their own occupation on their own land since the New Territories Lease in 1898.  The Colonial Government adopted the policy of giving the NTIIs permission to build such village houses by way of free building licence; exchange (surrender/re-grant) and private treaty grant when applied.  None of them were new when being adopted by the Small House Policy in 1972.

(viii)   Basis of the Small House Policy

68.  As stated in the 1972 ExCo Memo, the purpose of the Small House Policy was to control the squatter problems and improve temporary domestic structures and their conditions.  It was introduced at a time when close to 60% of the buildings in the rural New Territories were of temporary houses or unlawful houses; and while the rural New Territories had only 10% of Hong Kong’s population, it had nearly 40% of the squatter population.[60] As observed by the Judge, its main objectives were to address the serious squatter problems in the New Territories and to expedite the application process for small house grants.[61]

69.  That may well have been the purposes of the Small House Policy.  However, the Small House Policy plainly continued the previous practice of small house grant and had in fact elevated it into a formal government policy.  As the previous practice was based on the Government’s recognition of the NTII’s customs since 1898 to build village houses for their own occupation on their own land, the Small House Policy must have also operated on the same as its very basis.

70.  Such a basis of the Small House Policy is also evident from a letter of 18 December 1975 issued to the Chairman of the Heung Yee Kuk by the Secretary for the New Territories on the proposal of a 5 year non-alienation after grant.  There he stated at the outset:

“As you are aware, the current Small House Policy was formulated to allow, except in some locations and subject to certain limitations, people living in the New Territories an opportunity to own a permanent house and also to cater for the need for housing for villagers by enabling them to acquire land from Government at a price below the open market value of the land. They may be granted a premium-free conversion of their agricultural land to build small houses by way of Free Building Licences, or, be granted land by the payment of a reduced zonal premium.”

The reference to the opportunity to own a permanent house, properly understood in context, must relate back to the Government’s recognition of the NTIIs’ custom to build a village house on his own land since 1898.

(ix)     Recognition in legislation

71.  Importantly, the government’s previous practice with respect to small houses before 1972 was recognized in legislation.  So is the Small House Policy after 1972.

72.  The Buildings Ordinance[62] governs the planning, design and construction of buildings and the associated works in Hong Kong. When it was enacted in 1955, its application was confined to “Hong Kong, Aplichau, Kowloon and New Kowloon”.  Since 1 January 1961, it had been applied to the New Territories in the manner provided by the Buildings Ordinance 1955 (Application to the New Territories) Ordinance.[63]  Regulations made under the latter Ordinance exempted from the procedure of the Buildings Ordinance domestic buildings in the New Territories which did not exceed the specified dimensions.  Such houses were known as New Territories Exempted Houses (“NTEHs”).  NTEHs plainly included small houses constructed pursuant to the prevailing Government’s practice governing them.  They remained the position up to 1972.

73.  The Buildings Ordinance 1955 (Application to the New Territories) Regulations were amended on several occasions between 1961 and 1987 to effect changes over the dimensions of the NTEHs.  In fact, when the Executive Council adopted the Small House Policy, it also decided that legislative measures be introduced to exercise building control on small houses granted under the Policy.  The Buildings Ordinance (Application to the New Territories) (amendment) Regulations 1972 were then passed by the Legislative Council.

74.  The Buildings Ordinance 1955 (Application to the New Territories) Ordinance and the regulations made thereunder were replaced by the BO(ANT)O on 16 October 1987.  Under the BO(ANT)O, the Director of Lands may issue certificates of exemption to eligible buildings in the New Territories so that they can be exempted from the specified provisions of the Building Ordinance and the regulations made thereunder.  The dimensions and building requirements of an eligible building is described in the Schedule, which correspond those of a small house under the Small House Policy.

75.  Thus, although the Small House Policy is an administrative policy, one key aspect of its implementation, namely control over size, dimensions and other building requirements of the small houses, requires statutory backing as an exemption from the general application of Buildings Ordinance.  As such, it has all along been recognized in legislation since 1972.

76.  There are two other Ordinances, which came into force after the promulgation of the Basic Law, in which the Small House Policy is also recognized.  They are the SDO,[64] in particular, Schedule 5; and the Government Rent (Assessment and Collection) Ordinance (“GRACO”).[65]  As will be seen in a moment, they were enacted to give effect to the agreement made by the Government of the United Kingdom and the Government of the People’s Republic of China concerning small houses as evidenced in Annex III of the Joint Declaration.

(x)     Preservation of small house grants in Annex III of the Joint Declaration

77.  The Joint Declaration was signed on 19 December 1984 and took effect on 27 May 1985 when the instruments of ratification were exchanged.  By virtue of paragraph 6 of the Joint Declaration, the UK Government and the PRC Government declared that land leases in Hong Kong and other related matters would be dealt with in accordance with the provisions of Annex III.  Annex III in turn provided for the protection of land rights and land leases granted by the Hong Kong Government before 1 July 1997.[66]

78.  Relevantly, both Governments agreed in Annex III:

“1. All leases of land granted or decided upon before the entry into force of the Joint Declaration and those granted thereafter in accordance with paragraph 2 or 3 of this Annex, and which extend beyond 30 June 1997, and all rights in relation to such leases shall continue to be recognised and protected under the law of the Hong Kong Special Administrative Region.

2.     All leases of land granted by the British Hong Kong Government not containing a right of renewal that expire before 30 June 1997, except short term tenancies and leases for special purposes, may be extended if the lessee so wishes for a period expiring not later than 30 June 2047 without payment of an additional premium.  An annual rent shall be charged from the date of extension equivalent to 3 per cent of the rateable value of the property at that date, adjusted in step with any changes in the rateable value thereafter.  In the case of old schedule lots, village lots, small houses and similar rural holdings, where the property was on 30 June 1984 held by, or, in the case of small houses granted after that date, the property is granted to, a person descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong, the rent shall remain unchanged so long as the property is held by that person or by one of his lawful successors in the male line.  Where leases of land not having a right of renewal expire after 30 June 1997, they shall be dealt with in accordance with the relevant land laws and policies of the Hong Kong Special Administrative Region.”

79.  In paragraph 1, the protection to be conferred by the future HKSAR applies to all leases and all rights in relation to such leases.  Rights in relation to the leases held by the NTIIs mainly include the right to apply for small house grants.  Accordingly, it covers small house grants.  This view is reinforced by the rent benefits with regard to small houses in paragraph 2.  Those benefits are plainly predicated on the basis that small house grants would continue to be validly granted beyond 30 June 1997 despite its inherently discriminatory nature.  In other words, paragraphs 1 and 2 in Annex III evidenced an agreement reached by both Governments to preserve and protect small houses granted before the resumption of sovereignty on 1 July 1997 and thereafter.  Both Governments envisaged that the Small House Policy under which small house grants are made would continue after the coming into force of the Joint Declaration and beyond 1 July 1997.

80.  At [58] of the Judgment, the Judge observed that there was no evidence based on the drafting materials on the two Governments’ agreement that the rights of the NTIIs, including the right of male descendants to build small houses and not to increase their land rent.  He went on to say:

“On the contrary, while the issue of rent was dealt with in paragraph 2 of Annex III (Land Leases) to the Joint Declaration, there is no express provision anywhere in the Joint Declaration or the Annexes thereto conferring protection of any right of male descendants of the New Territories indigenous inhabitants to build small houses. In my view, the Joint Declaration and its various Annexes should be regarded as being the authentic documents embodying the agreement reached by the PRC Government and the British Government, and the PRC’s basic policies regarding Hong Kong. … In the circumstances, I am not prepared to proceed on the basis that there was an agreement reached during the Sino-British negotiations that the right of male descendants of the New Territories indigenous inhabitants to build small houses would be protected.”

81.  With respect, the Judge’s reading of paragraph 2 of Annex III had missed the point.  While it is true that there is no express provision in the Joint Declaration or Annex III on the protection of male descendants of the NTIIs to build small houses, the rent benefits in paragraph 2 must be underpinned by the continued validity of small house grants as agreed by the two Governments.  The Judge had also failed to read paragraph 2 together with paragraph 1 and to give due regard to the term “all rights in relation to such leases” in paragraph 1, which obviously covers small houses grants.

82.  Eventually, paragraphs 1 and 2 of Annex III were given effect by virtue of articles 120 of the Basic Law (“BL120”) and BL122.  We will consider BL120 and BL122 when we look at the purpose and objective of BL40.

(xi)     Drafting materials

83.  We next come to the contemporaneous drafting materials of BL40 between 1986 and 1989.

84.  The general principle regarding the utility of drafting materials for the purpose of interpretation is well settled.  Drafting materials as pre-enactment materials are relevant not because the drafters’ subjective mind as revealed might be used as an interpretation aid, which never is, but because they form part of the legislative history which may importantly informs the purpose of the constitutional provision under construction: see the two decisions of the High Court of Australia in Cole v Whitfield and Another [1987-1988] 165 CLR 360, at p.385; and Brownlee v The Queen [2001] 207 CLR 278, at [7]-[8]. That is how we will approach the drafting materials of BL40.

85.  The Judge summarized the effect of the drafting materials of BL40 as follows:[67]

“51. … The effect of the drafting materials can, I believe, be summarised as follows:

(1)     There was a sharp division or diversity of contemporary opinions on whether the existing rights and interests of the New Territories indigenous inhabitants (including the Small House Policy) ought to be preserved or protected after 1 July 1997.

(2)     The objections to the preservation or protection of the existing rights and interests of the New Territories indigenous inhabitants included arguments based the right to equality or the right against discrimination.

(3)     On the other hand, those who supported the preservation and protection of the existing rights and interests of the New Territories indigenous inhabitants argued that those rights and interests were ‘historical problems’ (歷史遺留下來的問題), or had ‘historical origins’ (歷史的淵源), or arose due to the ‘special circumstances of New Territories’ (新界的特殊情況), or were based on ‘a few hundred years of traditional custom or practices’ (數百年的傳統習俗) which ought to be respected[68].  In the context of those discussions, it seems to me to be plain that the references to ‘historical problems’, ‘historical origins’, ‘special circumstances of the New Territories’ or ‘a few hundred years of traditional custom or practices’ were meant or intended to refer to those traditional practices or conventions or customs in the New Territories which were in practice at the time of the New Territories Lease in 1898 and which were still being practised at the time of the drafting of the Basic Law.

(4)     It was generally thought, or assumed, that the Ding Rights formed part of the existing traditional rights and interests of the New Territories indigenous inhabitants.

(5)     There was, however, little in-depth analysis of what constituted the ‘traditional rights and interests’ of the New Territories indigenous inhabitants (save that in the Seminar Report mentioned below, there were references to 8 matters as being the existing rights or interests of the New Territories indigenous inhabitants), and whether the Ding Rights were indeed part of the traditional rights and interests of the New Territories indigenous inhabitants; instead the focus of the discussion was on whether the existing rights or interests of the New Territories indigenous inhabitants ought to be preserved or protected after 1 July 1997 by the Basic Law[69].

(6)     It was eventually decided that the ‘traditional rights and interests’, without further elaboration, of the New Territories indigenous inhabitants would be protected by the Basic Law via BL 40.

52.     A seminar was organized by [the Special Group on Inhabitants’ and Other Persons’ Rights, Freedom, Welfare and Duties] (“the BLCC Special Group”) and the Secretariat of the Basic Law Consultative Committee on 6 September 1986 to ascertain the views of the New Territories indigenous inhabitants regarding their rights and interests. At that seminar, [Heung Yee Kuk “the Kuk”] and Rural Committees were invited to make submissions, and Mr Lau Wong-fat (former Chairman of the Kuk) made submissions on behalf of the New Territories indigenous inhabitants.  A report collating the submissions made and the views expressed at the seminar (‘the Seminar Report’) was subsequently prepared and submitted to the BLCC Special Group for consideration at its 10^th meeting held on 16 January 1987.  It was agreed at that meeting that the rights and interests of the New Territories indigenous inhabitants should be written in the Basic Law, and that the Seminar Report should be submitted to the Basic Law Drafting Committee for consideration.  In the 1^st part of the Seminar Report, a total of 8 items of existing rights or interests of the New Territories indigenous inhabitants were set out, including: (1) the status of the Kuk and its members, (2) the right of the New Territories indigenous inhabitants once in their lifetime to build a small house (3-storeyed) with an area not exceeding 700 square feet and its height not exceeding 25 feet, (3) rates exemption for village houses in the New Territories, (4) ex-gratia compensation for the New Territories indigenous inhabitants’ villages in face of removal, (5) the New Territories indigenous inhabitants’ land leases and other rights relating to land, (6) burial rights of the New Territories indigenous inhabitants, (7) preservation of custom and cultural relics (as further specified), and (8) the New Territories indigenous inhabitants’ right to inherit legacy (in particular, the inheritance right belongs to the male members of a family in the absence of a will, and properties held under the names of a tong or tso are to be managed by a manager).  It may be noted that some of the rights mentioned in the Seminar Report, eg the status of the Kuk and its members, could not have formed part of the traditional rights or interests of the New Territories indigenous inhabitants under BL 40, because, as pointed out by Cheung J in Tse Kwan Sang[70], the Kuk was only established in 1926, which was almost 30 years after the British occupation of the New Territories, and the right to participate in the affairs of the Kuk was not available to the indigenous population in 1898.”

Subject to what we will say below on our reading of the drafting materials, we are in broad agreement with the Judge.

(xii)    No legal challenge

86.  Finally, the Small House Policy had never been subject to any legal challenge since 1972 until the proceedings below.  In other words, until the Judgment below, the Small House Policy in its entirety had all along been recognized as lawful in the legal system before and after 1997, notwithstanding its inherent discriminatory nature and the fact that the BOR came into force in 1991.

D2.    Purpose and objective of BL40

87.  In ascertaining the purpose and objective of BL40, its specific historical context is instructive. In Vallejos, supra, Ma CJ at [82] said that the court must take as the factual context, the scheme whereby foreign domestic helpers were allowed to enter and reside in Hong Kong subject to the highly restrictive conditions. Those were the facts that marked out foreign domestic helpers as a class and characterise the nature and quality of their residence in Hong Kong while employed as such.  Those facts must necessarily be at the centre of the court’s deliberations when it considered whether it was congruent with the concept of “ordinary residence” as employed in article 24(2)(4) of the Basic Law to treat them as a class not ordinarily resident.  Likewise, the historical factual matrix outlined in Part D1 above shows that the NTIIs are treated as a class of their own when it comes to their traditional rights and interests and the protection that they enjoy.  Those facts must lie at the centre of our deliberations on the purpose and objective of BL40.  

88.  As already pointed out, NTIIs as a status to distinguish them from the rest of Hong Kong’s population had its origin in 1898 when the New Territories Lease came into force.  By adopting the term “NTIIs”, the drafters must have 1898 in mind.  At that time, the NTIIs already enjoyed certain rights and interests, derived from the customs and usages practiced in the New Territories in the pre-Colonial era, which were unique to them because of their status and the assurances given to them on behalf of the Colonial Administration.  Subject to and if necessary as modified by laws in terms of their recognition, their form and the manner in which they were exercised and enjoyed, when such rights and interests were passed down from the first generation to their descendants, they became the NTIIs’ lawful traditional rights and interests as recognized in the legal system.

89.  As evident from the drafting materials, the drafters of the Basic Law were presented with certain specific rights and interests, said but not necessarily accepted by all to be traditional and lawful, which the NTIIs presently enjoyed and would continue to enjoy.  In drafting BL40, the drafters plainly aimed at protecting those extant rights and interests of the NTIIs which were recognized in the legal system as traditional and lawful at the time.

90.  On the “traditional” aspect, the drafters clearly did not intend to protect some rights and interests which might have been traditional but had already become extinct at the time or which might be asserted to be traditional sometime in the future.  Whether a right or interest is traditional for the purpose of BL40 is to be determined by reference to the state of affairs in April 1990.  So BL40 does not entail the tracing exercise advocated by the respondents and accepted by the Judge for the purpose of determining if an asserted right or interest is a traditional right or interest of the NTIIs entitling its protection.  The Judge at [55] of the Judgment cited Tse Kwan Sang, supra, and Koon Ping Leung, supra in support of the tracing exercise.  However, it should be noted that most of the historical and drafting materials pertaining to the construction of BL40 were not presented before the courts, as is here in these appeals.  Thus the two cases should not be regarded as authoritative on the “traditional” aspect of BL40.

91.  Further, human experience shows that traditional rights and interests might evolve when they were passed down from one generation to another without however losing its essential features.  Or that there might be occasional gaps and disruptions here and there without however really breaking their continuity or rendering them extinct.  The drafters must have clearly intended to protect a traditional right and interest of the NTIIs although it might not be enjoyed in exactly the same manner in its pre-1898 form provided it retains its essential or core features. Such intention accords with the cardinal principle that a constitutional provision must be interpreted to protect the essence of the right in question from impairment: see W v Registrar of Marriages (2013) 16 HKCFAR 112 at [65]-[67].  The drafters must have also intended to protect a traditional right or interest despite some occasional gaps or disruptions which did not break its continuity or render it extinct.

92.  On the “lawful” aspect, as said, the drafters intended to protect existing traditional rights and interests which were recognized as lawful in the legal system at the time.  Contrary to the applicants’ argument, the drafters did not intend to leave open the question of lawfulness to be determined by the courts after the Basic Law came into effect by reference to the Qing law, or the law before 1 July 1997 or thereafter.  For it would result in much uncertainty and render the promise to give constitutional protection to the NTIIs’ lawful traditional rights and interests already included in BL40 as early as April 1990 inefficacious, which clearly is not what the drafters intended.

93.  In our view, “lawful traditional rights and interests of the NTIIs” in BL40 mean those which are, as a matter of historical fact, recognized to be the NTIIs’ lawful traditional rights and interests in the Hong Kong legal system at the time of the promulgation of the Basic Law on 4 April 1990.  Applying the theme of continuity, BL40 continues and elevates the recognition and protection to a constitutional level for such lawful traditional rights and interests of NTIIs after 1 July 1997. 

D3.    Ding Rights

94.  As shown in the historical survey in Part D1, it is beyond doubt that the Ding Rights were as a matter of fact recognized in the Hong Kong legal system as lawful traditional rights and interests of the NTIIs during the drafting stage despite the heated debates about their discriminatory nature.  They were recognized as traditional in that they originated from and retained the essence of the NTIIs’ pre-1898 customs to build a house for their own occupation on their own land despite the change of the land holding system after 1898 and the disruptions caused by World War II.  They were recognized as lawful in that they were embedded in legislation and in the form of a government policy, giving rise to legal consequences enforceable in court.[71] They were not made unlawful by any statute, nor were they subject to any legal challenge or court decision denouncing them to be unlawful.  They had all along been recognized and accepted to be lawful. 

95.  The Ding Rights continued to be recognized in the legal system as the NTIIs’ lawful traditional rights and interests when the Basic Law was promulgated in April 1990.  It therefore falls within the ambit of BL40 and merits the constitutional protection in full despite its inherently discriminatory nature.  Since the protection has been elevated to the constitutional level, BL40 shields them from any challenge against their legality based on discrimination or other constitutional grounds including the equality provisions such as BL25, BL39 and BOR22.  If such challenge were allowed, it would defeat the whole purpose of BL40.

96.  We have already pointed out at [92] above that generally speaking, the question of lawfulness of the NTIIs’ rights and interests in BL40 does not involve a determination by reference to the law before July 1997.  In respect of the Ding Rights, we would add this.  The Small House Policy was never subject to any legal challenge since 1972, not even after the BOR came into force in 1991.  Since the respondents and the interested party accepted that the Small House Policy is inherently discriminatory, one might be tempted to argue that it must have fallen foul of the BOR before July 1997 had a challenge been mounted.  In fact, this would appear to be the applicants’ argument when they contended that lawfulness of the Ding Rights must be determined by the law before 1 July 1997, which includes the BOR.  However, we do not find such an argument convincing.  As will be seen below, because of the CEDAW reservations,[72] a weighty factor in construing the relevant articles in the BOR, the Small House Policy might well have survived a discrimination challenge based on sex, or social origin and birth.  Further, it is not entirely clear if the agreement reached by the UK Government and the PRC Government on small house grants as evidenced in Annex III of the Joint Declaration would impact on the challenge and if so how.  In short, it is doubtful such a notional challenge based on the BOR if made prior to 1 July 1997 would succeed.  This speculative exercise does not add anything to the analysis at hand.

97.  Our construction of BL40 is entirely consistent with the general purpose of the Basic Law.  In Ng Ka Ling, ibid, Li CJ described the general purpose of the Basic Law in these terms:

“[The] purpose of the Basic Law is to establish the Hong Kong Special Administrative Region … in accordance with China’s basic policies regarding Hong Kong as set out and elaborated in the Joint Declaration…”

One of China’s basic policies is to implement the agreement made by the UK and PRC Governments on land leases in Hong Kong and other related matters as contained in Annex III, which as demonstrated, includes the preservation of small house grants beyond 30 June 1997.  Conferring on the Ding Rights the constitutional protection under BL40 gives effect to one key aspect of that basic policy and achieves, on its part, the general purpose of the Basic Law.

98.  Our construction of BL40 is further supported by the coherence principle.  Briefly stated, the Basic Law must be read as a coherent whole: Comilang (CFA), supra, per Ribeiro and Fok PJJ at [61].  There are two aspects of its application in the present case.

99.  First, the coherence principle mandates that BL40 must be read together with BL120 and BL122.  It is because an article of the Basic Law should be read with and in light of other articles, especially those addressing the same or similar subject matter, to produce a harmonious and congruous instead of a discordant meaning: Chief Executive of HKSAR v President of the Legislative Council [2017] 1 HKLRD 460, per Cheung CJHC (as he then was) at [51].

100.  BL120, which gives effect to paragraph 1 of Annex III, stipulates:

“All leases of land granted, decided upon or renewed before the establishment of the Hong Kong Special Administrative Region which extend beyond 30 June 1997, and all rights in relation to such leases, shall continue to be recognized and protected under the law of the Region.”

It confirms that all land grants, including small house grants made pursuant to the Small House Policy irrespective of their form, made up to 30 June 1997 shall be continued to be recognized and protected under the law of the Hong Kong Special Administrative Region.

101.  BL122, which implements paragraph 2 of Annex III, provides:

“In the case of old schedule lots, village lots, small houses and similar rural holdings, where the property was on 30 June 1984 held by, or, in the case of small houses granted after that date, where the property is granted to, a lessee descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong, the previous rent shall remain unchanged so long as the property is held by that lessee or by one of his lawful successors in the male line.”

A number of points are worth noting:

(1)     When BL122 refers to small houses granted after 30 June 1984, it is not limited to those made up to 30 June 1997 but clearly extends to those made thereafter.

(2)     The benefit with regards to small houses granted after 30 June 1984 must have been predicated upon the continued validity of the small house grants so made after 1 July 1997.

(3)     The reference to “a lessee descended through the male line from a person who was in 1898 a resident of an established village in Hong Kong” incorporates the definition found in the Small House Policy, a strong indicator that small house grants mean those made pursuant to the Small House Policy.

(4)     Subsequently, the GRACO, in particular, section 4 applying to small houses, was enacted to implement BL122: Chan Wah, supra, at p.465D.

102.  Reading BL120 and BL122 together, insofar as small house grants made pursuant to the Small House Policy are concerned, irrespective of the form and whether they are made before or on 30 June 1997, they will continue to be recognized and protected under the law of the HKSAR.  When BL40 is construed together with BL120 and BL122, the Ding Rights must fall within the scope of NTIIs’ lawful traditional rights and interests.  Any contrary construction would render BL120 and BL122, insofar as small house grants are concerned, quite meaningless.

103.  With respect, the Judge failed to construe BL40 contextually and coherently with BL120 and BL122.[73]

104.  Mr Lee, for the applicants, argued that BL120 and BL122 do not assist the construction of BL40.  He first submitted that BL120 is a general provision; whereas BL122 is only a specific provision dealing with the quantum of future rent of properties in the New Territories on which small houses, among others, were built, and/or might continue to be built, by successful applicants under the Small House Policy.  Nothing in BL120 or BL122 therefore suggests that the Small House Policy must be maintained.  Mr Lee next submitted that “all rights in relation to such leases” in BL120 are not intended to include the Ding Rights but only to inchoate rights of action relating to land; adverse possession and modifications of conditions.  Finally, Mr Lee argued that had the drafters intended to include the Ding Rights, they could have expressly provided for it in BL40, as they did in BL122 for small house grants.

105.  With respect, we disagree.  The fundamental fallacy in Mr Lee’s reading of BL120 and BL122 is that it fails to take heed of the coherence principle.  On his first point, it fails to take into account the proper context of BL120 and BL122 and ignores the obvious points as mentioned at [101] and [102] above.  On his second point, such restrictive construction of the term of BL120, which is expressed to be all-embracing, is wholly unwarranted.  On his last point, as readily seen from the drafting materials, BL40 is clearly meant to be a general provision to protect all NTIIs’ lawful traditional rights and interests including but not limited to the Ding Rights.

106.  The second aspect of the application of the coherence principle explains how BL40 should and indeed can be read together with BL25, BL39 and BOR22 as a coherent whole.

107.  Both the UK and PRC Governments are parties to the 1979 Convention on the Elimination of All Forms of Discrimination Against Women (“CEDAW”).  Both Governments were evidently aware of the inherent discriminatory nature of the Small House Policy against female when they made the Joint Declaration, which might fall foul of the CEDAW.  Thus on 14 October 1996, the UK Government entered into a reservation with respect to its application to Hong Kong whereby:

“Laws applicable in the New Territories which enable male indigenous villagers to exercise certain rights in respect of property and which provide for rent concessions in respect of land or property held by indigenous persons or their lawful successors through the mail line will continue to be applied”.

The PRC Government made a similar reservation on 10 June 1997.

108.  It should also be noted that the reservation made by the PRC Government is given effect by Schedule 5, Part 2, section 2 of the SDO, which effectively exempt the Small House Policy from the operation of the SDO.

109.  These reservations with respect to the application of CEDAW is a weighty aid to the interpretation of the Basic Law and the BOR: see Comilang Milagros Tecson v Director of Immigration [2018] 2 HKLRD 534, per Cheung CJHC (as he then was) at [5]; and ZN v Secretary for Justice [2018] 3 HKLRD 778, per Lam VP at [202]. They seek to ensure the continued application of the laws which enable male indigenous villagers to exercise certain rights in respect of property, which clearly include the Ding Rights, after 1 July 1997 despite their discriminatory nature against female.  BL40 must be construed consistently with these reservations: see Comilang (CFA), supra, at [24]-[35].  Under such construction, the NTIIs must be entitled to exercise the Ding Rights, despite its discriminatory nature against female, as their lawful traditional rights and interests by virtue of the reservations.

110.  While the CEDAW reservations render a discrimination challenge against the Ding Rights based on sex impermissible, it must also inform the construction of BL40 in the context of a discrimination challenge based on other grounds, such as birth or social origin.  The reason is again coherence.

111.  In Comilang (CFA), ibid, Ribeiro and Fok PJJ held that the immigration reservation contained in section 11 of the Hong Kong Bill of Rights Ordinance[74] excluded from the scope of the provisions of the BOR given constitutional effect by BL39, immigration legislation governing entry into, stay in and departure from Hong Kong and the application of such legislation.  Further (and relevantly for present purposes), the Basic Law must be interpreted as a coherent whole, consistently with section 11.  Therefore, section 11 was not confined to rights in the BOR but extended by necessary implication to cognate rights in the Basic Law in the specific immigration context.

112.  Consistent with the CEDAW reservations excluding a discrimination challenge based on sex, BL40 must be construed to also exclude a discrimination challenge based on other grounds, such as birth or social origin, available in the Basic Law or the BOR.  Such construction ensures that a coherent constitutional scheme is laid down in BL40 to protect the Ding Rights as the NTIIs’ lawful traditional rights and interests.

113.  What remains is Mr Lee’s argument that since the NTIIs at most can only have a right to apply for a small house grant under the Small House Policy, the Ding Rights fall short of rights and interests under BL40 whatever they might entail.  The respondents and the interested party complained that the applicants did not take the point below.  Leaving that aside, we are simply unable to accept Mr Lee’s argument.

114.  It is trite that as a government policy, the Small House Policy creates legal obligations on the part of the Government to act upon it when faced with an application by an eligible NTII under the doctrine of legitimate expectation as explained by the Court of Final Appeal in Ng Siu Tung & Others v Director of Immigration (2002) 5 HKCFAR 1, at [92]; or by a related but free-standing principle articulated by Laws LJ in R (Nadarajah) v Secretary of State for the Home Department [2005] EWCA Civ 1363 at [68]; quoted with approval by Lord Wilson JSC in Mandalia v Secretary of State for the Home Department [2015] 1 WLR 4546, at [29]:

“Where a public authority has issued a promise or adopted a practice which represents how it proposes to act in a given area, the law will require the promise or practice to be honoured unless there is good reason not to do so. What is the principle behind this proposition? It is not far to seek. It is said to be grounded in fairness, and no doubt in general terms that is so. I would prefer to express it rather more broadly as a requirement of good administration, by which public bodies ought to deal straightforwardly and consistently with the public.”

115.  Corresponding to the Government’s obligations, an eligible NTII must have a right to the determination of his application in accordance with the Small House Policy.  It is plainly within the ambit of rights and interests for the purpose of BL40.

116.  For the above reasons, we hold that on a proper construction of BL40, the Ding Rights fall within the NTIIs’ lawful traditional rights and interests entitling them to the constitutional protection in full, despite their inherently discriminatory nature.  The Small House Policy is constitutional in its entirety.

D4.    Alternative case based on the Judges’ approach

117.  To complete the discussion on the Construction Issue, we will very briefly deal with the alternative case by reference to the Judge’s construction of BL40 including the four constituent elements that he had identified and, in particular, the tracing exercise.

118.  We agree with the Judge that the real issues were whether the Ding Rights could satisfy the “traditional” and “lawful” elements in BL40.

119.  On the “traditional” element, if contrary to our view in Parts D2 and D3, tracing is necessary, we agree with the Judge that a right or interest could properly be regarded as “traceable” if it captures or reproduces the essential feature(s) of a right or interest that was enjoyed by the NTIIs before the commencement of the New Territories Lease.  For the reasons that the Judge gave, we agree with him that the Ding Rights in the form of free building licence is a traceable right for the purpose of BL40. However, we think he erred when he did not reach the same conclusion for private treaty grant and exchange.

120.  As mentioned at [41] above, land in the New Territories had for many years before 1898 been held under the “customary tenure” based on custom or traditions.  Land held under the “customary tenure” was notionally divided into “topsoil” and “subsoil”.  To see if private treaty grant is a traceable right, the focus is on the rights and interests of the topsoil tenants of the customary tenure.  They are summarised at [41(2)] and we will not repeat them here.

121.  As summed up at [66] above, land in the village areas in the New Territories after 1898 were sold at concessionary rates by way of public auction from (a) around 1901 to 1904 or 1909; (b) public treaty grant from around 1909 to a few years after World War II; (c) restricted village auctions (which were effectively private treaty grants) from 1950s to 1972; and (d) private treaty grants since 1972.  We agree with Mr Yu and Lord Pannick that the essential or core features of a NTII’s right to apply for new land to build a house under the “customary tenure” were preserved by the successive ways of disposal of land in the New Territories. To recap, it is clear from the evidence that:

(1)       For (a), concessionary upset prices were used as the villagers believed they had always had the right to build houses on Imperial land and thus would only accept a low premium.  Village elders coordinated the bidders and thus lands were invariably sold at the concessionary upset prices.

(2)       For (b), the Colonial Government recognized the reality and agreed to sell land via private treaty grant at approved rates of premium and Crown rent to “bona fide applications from Chinese for their own occupation in place where there is not a likelihood of much development in the neighbourhood.” Between 1912 and 1921, around 82% of the house-sites within villages were disposed of by private treaty grants on concessionary terms.

(3)       For (c), after World War II, private treaty grants apparently fell into disuse and restricted village auctions reappeared.  They were restricted to villagers and the District Officers went to great lengths to “cook the auctions”.  Villagers, like their forefathers at the turn of the century, would organize themselves so there would only be one bidder per lot who would acquire the land at the upset price.  Non-villagers who acquired lands in these auctions were regarded by Government officials as having abused the system.

(4)       For (d), under the Small House Policy, which regularized the land policies with respect to villagers, the use of private treaty grants to replace the restricted village auctions was a reversion to the system before the War and a recognition that the restricted village auctions were in fact private treaty grants in all but name.  Private treaty grants would be offered to villagers at a concessionary rate (two-thirds of market value), which was said to be the level of upset prices for restricted village auctions and was consistent with the concession of free building license.

122.  The fact that the land was sold at the concessionary rate whatever the ways of disposal might be over the years is significant.  As rightly submitted by Mr Yu, the concessionary rate convincingly showed that private treaty grant was intended to enable an eligible NTII who did not own any agricultural land to, subject to the Government’s consent, acquire building land at a price commensurate to the costs he would have to incur had he acquired agricultural land and applied to convert it into building land via free building licence.  Put in the simplest terms, he would be placed in the same position as if he were an owner of an Old Scheduled lot who could apply to build a house via free building licence.

123.  Mr Lee SC placed much reliance on the fact that both women and non-villagers could obtain building land both before and after the New Territories Lease.  However, we agree with Mr Yu that the reality on the ground, as accepted by the Judge, is that they have always been regarded as anomalies as the rights and interests in question should be confined to male villagers only.

124.  In the circumstances, we agree with Mr Yu and Lord Pannick that the rights and interests enjoyed by an eligible NTII under a private treaty grant capture or reproduce the essential or core features of an eligible villager’s right to apply for new land to build a house under the “customary tenure” in the pre-Colonial era.

125.  For exchange, we also accept the submissions of Mr Yu and Lord Pannick that it is just a derivate of free building licence: see [57] above.

126.  On the “lawful” element, we agree with the Judge.[75]

127.  For completeness, we reject all the applicants’ arguments which we have not already specifically dealt with.

128.  It follows that even adopting the Judge’s approach on BL40, we would have come to the same conclusion as we did at [116] above.

E.     Relief Issue

129.  In light of our conclusion on the Construction Issue, the Relief Issue has become academic.  We only need to state the following brief reasons why we differ from the Judge.

130.  The length of delay in commencing the proceedings below is not only serious.  It is, as Mr Yu has submitted, phenomenal.  The Small House Policy was introduced in 1972.  The BOR was enacted in 1991.  The Basic Law has been in force for 23 years.  And the lack of explanation for such a delay is simply glaring.

131.  As pointed out by Mr Yu and Lord Pannick, the prejudice caused by the delay to third parties and detriment to good administration is substantial and goes beyond the potential hardship to the NTIIs who currently own small houses.

132.  It is well established that interest in good administration lies essentially in a regular flow of consistent decisions, made and published with reasonable dispatch; and in citizens knowing where they stand, and how they can order their affairs in the light of the relevant decision: AW v Director of Immigration [2016] 2 HKC 393 at [23]-[26]; R v Dairy Produce Quota Tribunal, ex p Caswell [1990] 2 AC 738 at 749H.  Here, the Small House Policy has been consistently and regularly applied since 1972, which has affected many in the New Territories.  In fact, between 1972 and 2018, a total of 111,995 applications were received, of which 8,657 applications were still being processed as at 30 June 2018.  Many eligible NTIIs and their families have conducted affairs on the basis that the Small House Policy is a lawful policy, with an expectation of being able to build a small house in the future.  The prejudice caused to them is on any view huge. Moreover, the Small House Policy involves important decisions of planning and scarce land allocation, which forms part of the land administration in the New Territories generally.  The delay therefore also indirectly but adversely affects the interest in the land administration in the New Territories, which has been operating over the years on the basis that the Small House Policy is a valid and lawful policy.

133.  With respect, the Judge had not taken into account these important factors.

134.  On standing, we agree with Mr Yu and Lord Pannick that the applicants did not have sufficient standing.  They have not indicated any intention to build a small house.  They do not suggest that they have any interest in any land, actual or potential, in the New Territories which is affected by the Small House Policy.  They have not said that but for the Small House Policy, they would have gained some land or housing benefit.  In short, they do not have any interest over and above that of an ordinary resident which give them standing to bring the judicial review.

135.  In the circumstances, we would have refused relief on the ground of delay and lack of standing even if we were to hold that the Small House Policy was, wholly or partially, unconstitutional.

F.     Dispositions

136.  In consequence, we allow the appeals brought by the respondents and the interested party and dismiss the applicants’ appeals.  We set aside the Judges’ judgment of 8 April 2019 on the constitutionality of private treaty grant and exchange and the orders that he made on 30 April 2019.  We dismiss the applicants’ application for judicial review.

137.  On costs, we direct the parties to lodge their written submissions, limited to 2 pages, within 14 days.  We will then decide the matter on paper.

138.  Lastly, we would like to thank counsel for their able assistance.