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9.
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On the facts set out above, I submit there is a strong case for waiving any claim for a refund of the advances totalling £2,500,000 made by His Majesty's Government betwoon the occupation of the Colony and the re-establishment of Civil Government, and for the acceptance as a charge against Imporial funds of the amounts still in suspense, as set out in paragraph 5 of this despatch, it being understood that the totals contained therein will be increased by payments contained in later Crown Agents' accounts and by the known outstanding account in respect of Macao payments of approximately £467,120. This, of course, would include acceptance by His Majesty's Government of responsibility for volunteer pensions, in which case all future payments of this type would be recovered automatically from the Ministry of Pensions.
10. Another very extensive liability with which this Government may be faced is in respect of claims for war losses. The position is still very obscuro and I can only furnish you with a brief outline of the types and approximate extent of the liabilities which may arise. In the first place there is the question of compensation for war damage to property.
You will have observed from my confidential despatch No. 281 of 29th November, 1947, that, for the reasons indicated therein, both my advisers and myself endorse the conclusions of the War Damage Claims Commissioner that no compensation should be paid to individual claimants and that any sum which His Majesty's Government may feel ablc to allocate for this purpose, should be devoted to rehabilitation work which would benefit the whole community such as, for example, the re-establishment of the University on at least the pro-war basis. If this recommendation is not accepted and some form of individual compensation is insisted upon, towards which this Government has to contribute, a now liability will be created which cannot be met from oxisting resources. The scaled down liability is estimated by the War Damage Claims Commissioner at approximately £25,000,000 and the liability of this Government would depend on the proportion to be mot by His Majesty's Government. I trust, however, that my recommendation will be accepted for, as I have already explained elsewhere, any attempt to impose special taxation to provide funds for such a purpose will give rise to many difficulties politically.
11.
Then there is the question of compensation for motor vehicles roquisitioned on the outbreak of hostilities and destroyed before the 25th December, 1941. As explained in my
(28) 55136/82/1/47 savingram No. 534 of the 10th September, 1947, the contention
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of this Government is that no compensation is due under the terms of the Defence Compensation Regulations unless it can be proved that the act of requisitioning materially increased the risk of destruction, Only in respect of vehicles used to convey supplies to forward posts can this have been the case for, in a restricted area such as the island of Hong Kong, any point was equally likely to receive attention from Japanese batteries. Although this view was acccpted in your telegram No. 1723 of the 8th November, the issue is sure to be contested locally and, if the present standpoint cannot be maintained, payments amounting to approximately £40,000 may have to be faced. This includes vehicles requisitioned by the Services, claims in respect of which would, in any case, presumably be mot from Imperial funds.
12. There is also the question of deposits held by the Treasury on the outbreak of hostilities which were confiscated by the Japanesc. These included deposits of contractors, newspapers, etc., security deposits by Government employees, certain Supreme Court deposits and funds held by the Secretary for Chinose Affairs relating to certain Chinese charities. have been advised that no claim lies against this Government in that it took all the precautions reasonably expected of a
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