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RECEIVED IN REGISTRY No. 51
J
- 5 JUN 1974
HKK 5/10 НКК
TO ROUTINE HONG KONG TELNO 471 OF 17 MAY 1974
YOUR TELNO 467: STERLING GUARANTEES
inala
PA starting
1. THANK YOU FOR THE REPORT OF THE RECENT DISCUSSION IN THE
EXECUTIVE COUNCIL.
4/05
2. RECENT EXCHANGES BETWEEN US HAVE, OF COURSE, FOCUSSED ON WHAT MAY BE TERMED THE OUTER LIMITS TO INTERPRETATION OF THE ACCIDENTAL
BREACH PROVISION. BUT THIS EMPHASIS ON THE BREACHES WHICH THE PROVISION DOES NOT ACCOMMODATE HAS TENDED TO DISTRACT ATTENTION
FROM THE BREACHES WHICH IT DOES ACCOMMODATE.
3. THE ACCIDENTAL BREACH PROVISION WOULD COVER AS ACCIDENTAL ANY
BREACH WHICH COULD NOT HAVE BEEN REASONABLY FORESEEN OR PRUDENTLY
PROVIDED AGAINST. IN PARTICULAR, THE PROVISION WOULD COVER A BREACH
THAT AROSE AS A RESULT OF A SUBSTANTIAL FALL IN GILT PRICES IN 2 SAY, THE LAST TWO OR THREE DAYS OF THE MONTH. MOREOVER, PARA 3(2) OF THE DECLARATION DOES NOT EXCLUDE THE POSSIBILITY THAT SEVERAL
SUCCESSIVE MONTHS MIGHT SHOW BRCACHES THAT WERE ACCIDENTAL IN THE
SENSE DESCRIBED ABOVE PROVIDED IN SUCH A CASE THAT ACTION HAD
BEEN TAKEN IN EACH MONTH TO CORRECT ANY BREACH THAT HAD ARISEN
IN THE PREVIOUS MONTH,
4. ALL THIS BEING SO, AND AFTER FURTHER RECONSIDERATION OF THE
HONG KONG CASE, WE DO FIND IT HARD TO SEE WHAT UNMET NEED REMAINS
FOR ANY REFORMULATION OF THIS PROVISION WHICH WOULD BE CONSISTENT
WITH THE OBJECT OF CONDONING ONLY ACCIDENTAL, REPEAT ACCIDENTAL BREACHES. WE CANNOT SEE AS UNSYMPATHETIC OR LEGALISTIC A RELUCTANCE
ON THE PART OF H.M.G. TO GO BEYOND A DISPENSATION WHICH PROVIDES
A LET-OUT IN RESPECT OF ANY PURELY ACCIDENTAL BREACH. THERE IS NO
QUESTION OF LACK OF GOODWILL IN THIS, AND WE HOPE THAT YOU WILL BE
ABLE TO PERSUADE E.X.C.0. THAT THE POSITION IS IN NO SENSE AN
UNREASONABLE ONE.
CALLAGHAN
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