10 MAY '93 10:25 H M TREASUR, HEF DIV
P.9
CONFIDENTIAL
grally favourable to applicants, and a risk of challenge Carnot therefore be ruled out in principle.
Even if, in principle, a challenge is held to lie on the basis of the expectations created by the White Papers, HMG's proposals would only be challengeable on public law grounds. It would not be sufficient for HMOCS to argue that they deserved more on the merits or that they had an expectation of a particular level of
because the White Papers do not create compensation
particular level expectation of a
of compensation. applicants would have to show one of two things.
an
The
First, they could show that the level of compensation was so low as to be unreasonable, ie that no reasonable HMG could possibly have concluded that such payments would be adequate by way of compensation. Secondly, they might show that the process by which HMG had decided what the compensation level should be was flawed in some way, eg by taking into account an irrelevant consideration or failing to take account of a relevant one.
It is mainly the existence of a settled practice of using those calculations without applying a 50% discount which raises a question. If this proposed scheme stood in isolation there would, I think, be no risk of challenge at all. HMG has a sufficient measure of discretion under the Papers to make almost any package unchallengeable unless the compensation was really so inadequate as to make such low level of provision wholly unreasonable, which would be quite a hard threshold for applicants to cross.
Even with the background of the other schemes, I tend to the view that the risk of successful challenge is low. As already mentioned, the 1960 Paper expressly contemplates different arrangements applying to different territories based on the differing circumstances of those territories.
However, there is a risk. Against a background of a settled practice in relation to other territories, a reduction in the case of Hong Kong of a figure as high as 50% must obviously be due to some reason. If a judicial review was commenced, HMG might have to explain what its reasons were in order to rebut an inference of irrational inconsistency. It would not have to demonstrate on the merits that those reasons justified a 50% reduction rather than say, a 40% reduction, because the court is not there to second guess HMG on the merits of the scheme.
However, the court would intervene if it thought that one of HMGS' reasons was not one which it was legitimate for HMG to have regard to at all because, in that case, HMG would have taken its decision on a wrong basis and the court would quash the decision and make HMG take the decision again, this time having regard only to proper factors.
HMG advance two main reasons for the 50% discount. One is that the Joint Agreement with China provides for HMOCS to be able to stay in their jobs after 1997 if they want to. I understand that this factor was not present in most of the previous contexts in which such schemes have been made. Clearly, it makes a
CREDENTIAL
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but what
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precedent.
michel
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