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Licensee which disclosed the remarkable fact that Government had no objection to your Petitioner's acquisition by private treaty of those rights it had consistently refused. These negotiations proved abortive as the enhanced capitalisation terms demanded were considered to be neither reasonable nor economic.
21. The next development was the creation in 1931 of a Traffic Committee under the Chairmanship of the then Secretary for Chinese Affairs, the Hon. Mr. E. R. Hallifax, C.M.G. Notice that this Committee had been set up was conveyed by Mr. Hallifax's letter of 13th July, 1931, to your Petitioner's Chairman (see Ap- pendix "F").
22. This Committee was of an internal nature. Its findings were not made public and have never been available to your Petitioner.
23. However, it was apparently decided to put up to public tender all motor bus transportation rights within the Colony. By Government Notification No. S. 319 of 2nd September, 1932, (see Appendix "G" hereof) such tender-upon due notice of cancellation of all existing licences for the exclusive right to operate specified Motor Bus services, either for the whole of the Colony or, separately, as to the Island of Hong Kong and as to Kowloon on the mainland, were called for.
24. Your Petitioner is only concerned with the Island of Hong Kong. Tenders were to take the form of a Royalty to Government based upon a percentage of gross receipts.
25. Your Petitioner had then to overcome grave objections, founded upon ac- cepted views and practice, to what it considered to be the unsound principle of tendering a Royalty based upon gross receipts. Your Petitioner feels confident that this view would obtain the support of all recognised authoritative opinion including that of the Ministry of Transport. However, the position was such that it had no alternative, without fatally prejudicing its prospects of any further participation in the field of motor-bus operation, but to submit such a tender. Despite its convictions, therefore, your Petitioner did submit an offer in the strict terms of the invitation.
26. Monopoly rights were awarded as to Hong Kong and Kowloon respectively to the tenderers offering, it is believed, the highest rate of Royalty.
27. Although your Petitioner offered by way of Royalty the high figure of 12% of the gross receipts that tender was rejected in favour of a private syndicate (whose previous operations had been confined to motor bus services in Kowloon) which immediately incorporated itself upon joint stock lines under the Companies Ordinances and remains, as heretofore, entirely Chinese owned, controlled, managed, operated and staffed.
28. Your Petitioner's solicitors have been favoured by Government with a copy (which is reproduced as Appendix "H") of the actual licence issued to the successful tenderer for the Island of Hong Kong. It is there shown that its royalty offer was one of 14% rising-on a basis of volume of annual receipts-to 17%.
29. Your Petitioner formulated its own tender on the fair interpretation that second class (5 cents) fares-where specifically omitted in Schedule "B" of the invitation to tender-were so excluded, and purposely excluded, in accordance with the Government's policy, in respect of those particular routes, hitherto enforced.
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30. It was your Petitioner's considered conclusion that on the strict inter- pretation of the terms and conditions laid down the successful tenderer could not maintain such a high rate of royalty and would be compelled to resort to appeal for relief.
31. The Government, however, took the risk of proceeding with the experi- ment with results which have inevitably led up to the third stage, the stage at which your Petitioner is reluctantly compelled to memorialise you and take that action which it deeply and sincerely regrets was not taken at the commencement of this cycle of events originating in 1928.
32. The successful tenderer-now The China Motor Bus Co., Ltd.-actually commenced operations on 11th June, 1933, after the obligatory acquisition (at an agreed price) of the vehicles belonging to the previous licensees, namely, The Hong Kong and Shanghai Hotels, Ltd., The Aberdeen Kai Fong Motor Bus Co., Ltd., (formerly operating certain outlying country services) and your Petitioner.
33. The China Motor Bus Co., Ltd., proceeded to carry out its services under the conditions as to fares, routes and, generally, in accordance with the actual pro- visions laid down in Notification No. S. 319 and an important factor in its favour has been the steady, and recently considerable, improvement in the HK$ £ Exchange which has had the effect of lowering petrol and maintenance costs. There can be no doubt whatever that this factor has unexpectedly--though very materially-aided the experiment which Government took with the passenger transportation system of the Colony.
34. However, after operating for about four months only the new licensee made its first application to Government (which is closely referred to later) for sanction to extend its routes. One proposal was to extend a bus route to your Petitioner's most easterly terminus. This would have brought the whole of the tramway area within the ambit of motor bus competition.
35. It is not possible for your Petitioner accurately to assess the financial position of The China Motor Bus Co., Ltd., to-day, but from a perusal of the Report and Statement of Accounts submitted at the first annual general meeting of that Com- pany held on 27th October, 1934, it is possible to realize the financial position at that date. Having disbursed by way of dividend the whole of its profits (earned to the date of those accounts) the Motor Bus Company were clearly faced with serious misgivings when viewing the financial outlook. It was, therefore, necessary to at- tempt to obtain concessions from Government if it were to fulfil its obligations, carry out its contract and contemplate renewal of its already much used and deteriorated rolling stock, most of which is now nearly seven years old (see para. 32).
36. Your Petitioner refrains from further comment but earnestly refers you to Appendix "J" reproducing a certified translation of this Report and Statement of Accounts.
37. The contents of that Appendix substantiates the view your Petitioner has always held, namely, that The China Motor Bus Co., Ltd., in formulating its tender embarked upon a gamble in the hope of being able to extract concessions from Government later in case of need. Such a situation has apparently arisen and the Motor-Bus licensee has obtained-to a substantial extent the relief upon which it gambled.
38. The China Motor Bus Co., Ltd., by the terms of the call to tender (Noti- fication No. S.319 of 2nd September, 1932, which constitutes the basis of its licence) entered into well defined commitments generally, and, particularly, as to specified
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