TNAG-0639-FCO40-787-Construction-of-underground-railway-system-in-Hong-Kong-(Mas-1978 — Page 121

C.S. 84

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XCR (77)148

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Each item in the Schedule specifies the form of finance and the country or bank which has granted or arranged each par- ticular facility. It states the sum and currency of the finance in- volved; and in most cases these details are followed by the phrase "and such amounts as may become payable in respect of interest and other charges". Some items also contain the phrase "and such amounts as may become payable in consequence of the operation of any price variation clause".

The problem

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The Mass Transit Railway Corporation is now experien- cing difficulty with an apparent discrepancy between the wording of Section 12(1) and the wording of the Schedule. The purpose of the Bill before Honourable Members is to allay all doubts arising from the discrepancy.

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The apparent discrepancy is that while section 12(1) of Chapter 270 states (paragraph 3 above) that the Legislative Council has power to authorise the granting of guarantees "up to an amount not exceeding in total that specified in the resolution.... the precise amounts for interest and escalation have not been stated in the Schedule to the Legislative Council Resolution. In consequence, the Mass Transit Railway Corporation has been in some difficulty with the solicitors of Schroders and Chartered Ltd. who question the enforceability of the Government's guarantee in respect of interest on a facility for HK$600 million.

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If these solicitors give either a qualified formal opinion or a formal opinion that the guarantee does not cover interest, the effect on the banks may be such that the Corporation will be unable to make any further drawings under its existing finance.

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The Government's intention certainly was to include interest and escalation within the scope of the guarantees. The reason why precise figures were not included in the Schedules was, of course, that the precise amounts are not known. The Law Officers hold the view that the absence of the precise amounts for interest and escalation from the Schedules in no way reduces the validity of the Government's guarantee as far as interest and es- calation are concerned. The solicitors for Schroders and Char- tered Ltd. do not accept the arguments supporting this view.

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