5. The question of a lien on the company's earnings presents some difficulty of definition. H.M.G. 18 being asked to back the Hong Kong Government as guarantor. But that Government is claiming a priority position for payments due to itself amounting to some 10-15% of the expected excess of revenue over operating expenses. Consequently, if the guarantee is ever called it will be for a sum increased by the amount of these prior payments and H.M.G. will be asked to bear 50% of the enhanced call. This is not in our view reasonable. We propose that, at least, the two claims stand equal and the available income be applied equally between the two claims until one is met. If the Hong Kong Government prefer, we would accept that Taxes and Rates should rank first, with the loan and its interest coming next for a like amount, and the two claims to stand equal for the remaining claims of the Hong Kong Government.
59) 6.
Paragraph 4(e) of Figgures' letter of 8th September caused some difficulty to Mr. Cowperthwaite. As an expression of H.M.G.'s intention to see that the contract is not so onerous as to cripple the contractor it must remain. But we are prepared to regard it as a request rather than a condition of approval of the counter-guarantee.
7. We are preparing a brief for Lord Shepherd's visit to Hong Kong as directed by Ministers and will let you see a draft as soon 88 possible. I am told there is some urgency. If you or Commonwealth office see any difficulty about the foregoing, please let me know by telephone, as I must draft on the assumption that this is our position. Similarly, I shall have to assume that agreement is reached on security, the brief will have to be embargoed until that point is cleared.
8. I am copying this to Carter (C.0.)
Yours sincerely,
(D. L. Hawkins)