'We have found a few representative students to apply for legal aid and we are now discussing with lawyers the grounds to launch a lawsuit. The government has to cut fees and arrange a refund.'

Mr Chan said they had also met the Consumer Council to see if they could launch a collective lawsuit. But the request was declined, as the council only deals with complaints concerning the private sector.

Wan Wing-fai, vice-president of City University Student Union, said they would also lodge a complaint against government maladministration with the Ombudsman.

Education and Manpower Bureau officials will today explain at a Legislative Council education panel meeting why fees had remained the same while the cost of education had fallen amid deflation and university budget cuts.

The South China Morning Post reported last month that undergraduate students in Hong Kong had been overcharged $691 million in tuition fees since 2001. A policy decided by the Executive Council in 1991 states that tuition fees should equate to 18 per cent of their course costs.

But University Grants Committee statistics show the cost of educating each student dropped by 11.9 per cent in course costs over the same period, resulting in students overpaying up to $5,200 each year.

Students will continue to be overcharged in the next two years unless fees are cut, as the government announced last week that it would freeze university funding until 2008.

In a paper submitted to lawmakers, the bureau also disclosed that students studying associate degree and postgraduate taught courses had been overcharged by about $5,900 each last year. A total of 62,721 students studied in associate degree, undergraduate and postgraduate taught programmes.

The bureau admitted tuition fees had exceeded the 18 per cent target but insisted the Exco rule was not binding. It also stressed the cost for an individual university student did not fully reflect the government's total investment on universities.

Cheung Tat-ming, an assistant law professor at the University of Hong Kong, said it would be difficult for students to ask the government for a refund because the Exco decision was a policy rather than a piece of legislation.

'But they should have grounds to launch a judicial review asking the government to abide by the Exco decision and cut tuition fees in future,' he said.

Democratic Party legislator Cheung Man-kwong, who represents the education sector, said the government should act according to the Exco decision. He warned officials not to raise the 18 per cent target to justify the overcharging.

Mr Chan said the student unions were particularly angry after the government announced two weeks ago that it would raise senior secondary school fees because the 18 per cent target was not met. The bureau said it would increase fees by $300 for each student in September, with further rises in coming years as the fees now only cover 15 per cent of the cost.

'This is simply double standards. Officials said the 18 per cent target has to be met when secondary school students were undercharged but argued that it was just a reference when tertiary students were overcharged,' he said.

Mr Chan said they had asked other student unions to take joint action but failed. 'They said they are too busy because it is time for exams. This is very disappointing.'