TNAG-0849-FCO40-1059-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 126

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Mr McLaren aro!!

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1. I mentioned to you my fear that, following what was said during the Governor's visit to Peking, we might now be on the wrong track in continuing to pursue the idea of indeterminate leases as a solution to the New Territories leases problem. Your initial reaction was to believe that I was reading too much into Deng's statement to the Governor about how he envisaged the future of Hong Kong. I should nonetheless like to set out my ideas in more

detail.

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2. The main objection to the indeterminate leases plan all along has been that such leases have certain inherent draw-backs. To begin with, they cannot be introduced without prior legislation in Hong Kong (a difficulty that is compounded by the Governor's insistence on having covering legislation in this country), which means not only extra trouble, but also that the change to the new system is inevit- ably going to attract much more attention than it might otherwise do. But more fundamentally, the reason why such legislation is necessary is because common law does not recognise indeterminate leases, not through some oversight of history but because such leases are by their very nature legally unsound. The Hong Kong Solicitor-General himself quoted two legal authorities to show that a lease must have a definite limit, either by specifying the number of years or by reference to a collateral matter which can be looked to in order to ascertain when the term must end. Although the Solicitor-General (and, incidentally, the Principal Assistant Solicitor in the Treasury Solicitors Department concerned with conveyancing, Mr R B Gardner, in his private opinion on the problem) anticipated that this problem could be overcome by statute, I do not see how intro- ducing new legislation is going to remove entirely that inherent unsoundness: if a lease is not good for a clearly understood period, it is surely not good at all? Admittedly, there is a differ- ence between such a lease issued by a government (where there must be ap sumption of good faith) and one issued by a private landlord where the tenant could have no confidence that it would not be terminated at any moment the landlord chose - but even so, the introduction of indeterminate leases is likely to lead at the very least to controversy in Hong Kong which could mean at the end of the day that the measure is received with less than full confidence.

3. It could perhaps have been argued that while we had the phrase "for so long as the Crown shall administer the Territory" in the leases this was adequate to meet the requirement for some indication of the term. But now that such a phrase is ruled out, we are left with leases open to all the fundamental objections to indeterminacy.

4.

We have of course been over this ground before: we have all along been conscious of the disadvantages of indeterminate leases, but nonetheless decided that they were a better bet than leases for a specific term going on beyond 1997 because:-

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