The monthly rent of a flat at the centre of a fraud case involving former development minister Mak Chai-kwong and assistant highways director Tsang King-man was approved by the Rating and Valuation Department, a court heard yesterday. Principal assistant secretary of the Civil Service Bureau Lui Kin-fun told the District Court that the monthly rent of HK$10,000, which was paid by Tsang's younger sister Tsang Wai-wah, who was then an engineer with the Drainage Services Department, for flat 21E at City Garden in North Point from December 1989 to August 1990, was approved by the Rating and Valuation Department. He said the department conducted regular rental studies in different districts and used the data to assess whether monthly rents stated in the housing allowance claims were reasonable. The prosecution earlier said the rent was below market rates. Mak, 62, and Tsang, 57, are accused of conspiracy to defraud the government of HK$700,000 by "cross-leasing" their homes in 1986. Mak also faces two counts, and Tsang three counts, of using documents with intent to deceive the government. The flat was bought by Mak and his wife in 1985 and then leased to Tsang, the court heard. The prosecution alleged on Monday that the rent was below the market level when Tsang arranged for his sister to lease the flat from Mak while he was studying in Britain from September 1989 to September 1990. Prosecution lawyer Daniel Marash SC said the arrangement proved Tsang was the real owner of flat 21E although he claimed he was leasing it from Mak. The pair are accused of entering into a fraudulent arrangement to buy two flats in the same building and then leasing them to each other in the names of their wives, thereby concealing their financial interest in the flats in which they were living, the court earlier heard. The alleged incidents took place from June 1985 to December 1990. The Civil Service Regulations stated that a civil servant who applied for the housing allowance must not lease "a property that is owned by him, his spouse, or a relation of either himself or his spouse or in which he, his spouse or any of his or his spouse's relations have a financial interest", the court heard. Lui told the court that an "honesty system" was applied when civil servants submitted their applications. The hearing continues today.