CO129-589-15 Crown leases 4-2-1941 - 3-12-1941 — Page 18

2

16

municated by a Chartered Accountant who writes under date

18th November, 1940:-

"In making my valuation of R. B. L. 10 in 1927 I did not ignore the expiry of the lease; I spe- cifically reported that I had deliberately not taken its early expiry into consideration. I be- lieved it should not be and my belief so strong as to lead me to report to the disadvantage of my client

arose as follows:

"As a Scottish Chartered Accountant, I am re- quired to be conversant with the theory of Leasehold amortization, Sinking Funds, etc. In practice as a Senior in Edinburgh, London and Shanghai, I had applied that theory in the audits of Banks' and In- surance Companies' Securities.

"On joining the late Mr. A.R. Lowe, F.C.A., in partnership in 1922, the short term leases current here immediately came to my notice and I discussed them fully with him. He was at that time a member of the Legislative Council of Hong Kong, had already been retained by Government professionally on several occasions and apparently enjoyed the confidence of the officials of his time. He had been Secretary of the Chamber of Commerce for some twenty years and certainly was aware of this lease question.

"He informed me that no amortization of these leases was called for since it was understood they would be renewed on expiry at a reasonably increased Crown rent. He also informed me that short leases granted early in the settlement of Hong Kong had been extended without penalty and further that the extension of Peak Leases for at least twenty years had been promised. His views as regards leases were shared by executives with whom I then discussed them.

"While auditing local Bank and Insurance Companies' Accounts since then, I have examined innumerable val- uation reports given by many architects past and present, and in no case until very recently have I seen any allow- ance made for amortization of Leases. Such unanimous confidence in the renewal of leases by professional men did not arise from wishful thinking and certainly not from ignorance of the rules governing leasehold valuations.

"None of the foregoing adds to your knowledge of this problem, but I feel it should be written to refute the allegation of incompetency expressed by the valuation officer."

I have the honour to be,

Sir,

Your obedient servant,

(Signed) II. F. KEY.

Secretary.