31.126/3/48
HUNG YOND
1273
SOMPIDATUL
sir,
COLONIAL OFFICE,
THE CHURCH HOUSE,
GREAT SMITH STREET,
LONDON, S.W.1.
3 september, 1948.
GOVOR,
I have the honour to refer to your despatch No. 1044 of the 13th May, 1948 about the liability of the Hong Kong Government to replace certain funds in their custody before the war war which were confiscated by the Japanese during the enemy occupation.
2.
This matter has been carefully considered and I am advised that, so far as these fuvis wich were placed in a seperate account are conse:ned, there is no liability upon the Hong Mong Government to replace them, but thet in respect of those funds which were paid into the general Government Account, the Hong Kong Government cannot avoid liability except upon the ground that a strong degree of probability existed that the funds would have been seized in any event, even though they had been placed in separate accounts.
3.
On the general question of responsibility for the loss of funde by a person who holds them in a fiduciary capacity, it is agreed that in law a greater care as a custodian cannot be imposed upon him than that of keeping them as he would his own. Cerainly the safeat way of keeping money is to lodge it with a banker, and in regard to the funds under discussion, in whatever categor, they fall, the liong Kong Goverment was doing the proper thing in lodging them with the Hong Kong and Shanghai Bank. But the question of responsibility does not end there. In paying certain of these funds into the general Government Account the Hong Kong Government not only kept the money as they kept their own but kept the money 83 their cm and the question arises whether, being thus represented as Government property, the funds were exposed to additional risk of confiscation.
4.
on this point, it must be noted that, whereas it is quite olear from Article 53 of the Hague Regulations that an occupying power may appropriate cash, funds and realisable securitie ties belonging to the hostile state, private funds are in international law protected from confiscation (see Oppenheim's International Law, Fifth "dition, Volwe II(VI), para,143). It was the duty of the long ong Government to protect these deposits from loss by enemy seizure, Clearly,by being treated as Government funds, they were exposed to such seizure and it is no answer to say that this is normal Government accounting procedure. There was no legal obligation to treat these funds as Governmen funds nor did the beneficiaries ask that they should be so treated.
5.
It is, however, sugested in para. 10 of your despatch under reference that there is no certainty that if the funds had been placed in seperate a counts they would not have been confiscated. As to this point, it can ot, I think, be assumed that in respect of these funds the Japanese would have ignored international law, especially in view of the fact that,
3IR ALEXANDER GAFTHAM, K.8.G.
etc.
exc
/of