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CFA upholds Small House Policy in full

By Colin Cohen

Hong Kong, 19 November 2021: In a much-anticipated judgment, the Court of Final Appeal has upheld the exclusive right of male indigenous villagers in the New Territories to build their own homes, ruling that the so-called Small House Policy is constitutional in its entirety.

The judges have declared this right is protected under Article 40 of Hong Kong’s mini-constitution, the Basic Law, and that it overrides anti-discrimination provisions elsewhere in the Basic Law and in the Bill of Rights. Article 40 states: “The lawful traditional rights and interests of the indigenous inhabitants of the ‘New Territories’ shall be protected by the Hong Kong Special Administrative Region.”

Background

The Small House Policy, which dates back to 1972, is a non-statutory administrative policy operated by the Lands Department which allows adult male indigenous villagers – or ding – to build a house limited to three storeys and 700 sq ft per floor in their New Territories village. The applicant must be descended through the male line from a resident of the village in 1898, the year Hong Kong acquired the New Territories from Mainland China on a 99-year lease.

There are three ways the villager can apply:

  • If he owns land and it is suitable for a house, he can seek a free building license, thus avoiding a land-use conversion fee.
  • If he owns land but it is unsuitable for a house, he can apply to exchange it with the government for a suitable plot at a reduced or nil premium.
  • If he does not own land, he can apply for a private treaty grant on government land at a concessionary premium (generally about two-thirds of the full market value).

Critics of the policy point out it discriminates on the basis of sex, birth and social origin. They also contend it is unfair to most Hong Kong citizens given the city’s high property prices and generally cramped living spaces. Further, they highlight how the system is open to abuse, such as villagers illegally selling their building rights to developers.

Both the government and the Heung Yee Kuk, the powerful rural body that represents villagers’ interests, concede the policy is discriminatory but have always defended it as being consistent with Article 40.

Legal challenge

Retired civil servant Kwok Cheuk-kin, known as the “king of judicial reviews” for his frequent legal challenges to the government, won a partial victory in 2019 when the Court of First Instance ruled that only free building licences could be regarded as a traditional ding right since they were traceable back to 1898 whereas exchanges and private treaty grants could not. None of the parties were satisfied with this partial endorsement of the Small House Policy and all challenged the decision.

The CFI ruling was overturned last January by the Court of Appeal, which concluded the Small House Policy was “constitutional in its entirety”. The CA held that all ding rights were recognised when the Basic Law was promulgated in April 1990. Even if such rights had to be traceable back to 1898, they originated from, and retained the essence of, the custom of a ding constructing a house for his own occupation on village land.

Kwok took his case to the Court of Final Appeal, where he argued that “lawful” meant the scope of Article 40 was qualified by, and ought to be interpreted in line with, the anti-discrimination provisions in Articles 25 and 39 of the Basic Law and Article 22 of the Bill of Rights. (Notably, Article 25 of the Basic Law states simply: “All Hong Kong residents shall be equal before the law.”) He also argued that “traditional” meant ding rights had to be traceable to 1898.

The government and Heung Yee Kuk (acting as an interested party) insisted Article 40 limited and qualified the application of the anti-discrimination provisions, not the other way round. They also argued “traditional” meant traditional by 1990, not 1898.

CFA judgment

The judges rejected Kwok’s arguments. In doing so, they concluded the word “lawful” in Article 40 refers to the how the Small House Policy is implemented as a matter of public law. The relevant right or interest of an applicant under the policy is lawful if such discretion is lawfully exercised. By its use in Article 40, “lawful” is not intended to refer to the absence of discrimination forbidden by other articles in the Basic Law and in the Bill of Rights, whose application in the special context of indigenous rights is excluded by Article 40.

Further, the CFA held that the CA was correct to find that “traditional” in Article 40 is to be determined by reference to the state of affairs in April 1990, and does not require that a protected right or interest be traceable to the period before 1898. In line with the principle of continuity, the fact that only male descendants of pre-1898 villagers were eligible under the Small House Policy was part of the description of the system which the HKSAR inherited and which Article 40 intends to protect.

The judges noted there were persistent demands before the promulgation of the Basic Law that the Small House Policy should come to an end. “[Article 40] marked the rejection of these demands,” they wrote.

The CFA also highlighted that while the Small House Policy is implicitly acknowledged in several ordinances and the Basic Law itself, it does not have a statutory basis but is applied as a matter of administrative discretion. Accordingly, the relevant right – while “inherently imperfect” – is founded entirely on public law. “We would define it as a right to have one’s application dealt with in accordance with the criteria laid down in the government’s statements of current policy, subject to the lawfully exercised discretion of the Lands Department. That discretion is not unlimited. It is governed by law.”

What happens next?

In delivering this judgment, the CFA has effectively ended debate about the legality of the Small House Policy, although Kwok has indicated he will write to the National People’s Congress Standing Committee, China’s top legislative body, to ask for an interpretation of the Basic Law. Whether or not he follows through with that action, wider discourse about abuse of the Small House Policy, future land development and shortage of housing space is bound to continue.

Senior Partner in BC&C since 2004, Colin Cohen has vast experience in the highest levels of Hong Kong’s legal system, leading teams in complex corporate crime cases, high-conflict civil litigation, dispute resolution, landmark judicial reviews and Court of Final Appeal hearings. In the course of his career, he has co-ordinated defence teams on some of the territory’s most high-profile court cases. He can be contacted at colin@boasecohencollins.com.

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