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Legal Update

The Court of Final Appeal Frowns upon Orders Requiring Minority Owners to Pay the Costs of Applicants in Compulsory Sale Cases

26 May 2011
Mayer Brown JSM Legal Update


The Court of Final Appeal ("CFA") recently handed down its judgment in Sin Ho Yuen the administrator of the Estate of Sin Yat, deceased v. Fineway Properties Limited FACV 13/2010.

The parties had achieved a settlement shortly before the hearing of the appeal and invited the CFA to dismiss the appeal with no order as to costs. Although it was not necessary for the CFA to do so, the CFA took the opportunity to express the view to the effect that a minority owner who opposes an application for an order for compulsory sale should not normally be required to pay the applicant's costs, otherwise the objective of the Land (Compulsory Sale for Redevelopment) Ordinance (the "Ordinance") would be defeated.

The CFA also expressed the view that the Lands Tribunal should have the responsibility to ensure that compulsory sale cases are efficiently dealt with in a cost effective manner and gave guidance on the management of these cases.

Costs Order

Both Mr. Justice Bokhary PJ and Mr. Justice Litton NPJ expressed concerns over the costs order made by the Lands Tribunal (in which the minority owner was ordered to pay 90% of the applicant's costs). They emphasized that one of the objectives of the Ordinance is to ensure that the minority owner receives fair and reasonable compensation for his interests in the lot. The protection of minority interest under the Ordinance becomes therefore a key factor. That objective would be defeated if such compensation is swallowed up or materially eroded by the costs which the minority owner has to pay to his own or the other side's lawyers.

In the past, in compulsory sale cases, the practice of the Lands Tribunal was to make an order for costs against a minority owner if he chose to actively defend the application - the minority owner would be ordered to pay a percentage of the costs of the applicant and the percentage would depend on the manner in which he opposed the application. This works to the disadvantage of the minority owner, as the amount of costs could be substantial and disproportionate to the compensation to which he is entitled.

In future, it will be unlikely for the Lands Tribunal to grant an order for costs against the minority owner, except perhaps in cases where the minority owner has conducted his case in a manner which can be said to be unreasonable.

Applicants for orders for compulsory sale can expect that it would be more difficult to secure a settlement with minority owners. In the past, the fact that an order for costs would likely be made against the minority owner operated as a significant incentive for the minority owner to settle. With the judgment of the CFA, this would no longer be a significant consideration.

Setting of Reserve Price

In relation to the setting of the reserve price, Mr. Justice Bokhary PJ commented that the reserve price should be fixed by reference to the value of the land (found or agreed) as at the date of the order, and is subject to a subsequent change of circumstance. It is immaterial whether the reserve price was fixed by consensus or upon evidence.

Case Management

Mr. Justice Litton NPJ questioned why the hearing of this case in the Lands Tribunal took 18 days spread over nine months. He considered that the underlying objectives of the Civil Justice Reform, being cost effectiveness, expedition, proportionality and procedural economy, should always be the underlying objectives of the Ordinance. He made the following suggestions:-

  1. When dates have been fixed for a case, it means that it will conclude on the last day, if not before.
  2. To ensure this is achieved, the parties’ legal representatives might, for instance, be asked beforehand to apportion the dates between them for the different stages of the proceedings: a timetable to be devised by the president of the Lands Tribunal if the parties fail to agree.
  3. In a suitable case, the valuation exercise might be curtailed.

In future, the Lands Tribunal can be expected to follow the above suggestions as far as possible when it gives directions on case management in compulsory sale cases.

For inquiries related to this Legal Update, please contact:

F.K. Au ( )

Yeda Hong ( )

Learn more about our Hong Kong office and Real Estate practice.

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