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5. But even if further grant covering payment of these claims were forthcoming from His Majesty's Government it is most undesirable that Government of Hong Kong should be required to effect settlement. It has been decided that
no compensation should be paid in respect of war damage and payment by His Majesty's Government in claims of type referred to above would not have any repercussions locally. If, however, this Government is required to settle such (?claims) even though amount paid out may be refunded by His Majesty' s Government, it would undoubtedly reopen this question of compensation for war damage. If denial claime resulting from incidents which took place during December 1941 are settled locally, it will inevitably be argued that claims in respect of damage caused by American bombers during occupation period are equal to denial. While there may be no legal liability in respect of this latter class of claim, War Damage Claims Commissioner in paragraph 22 of his report expressed the view that discrimination between these rigid denial claims could not in equity be justified. He pointed out that it would be extremely difficult to establish definitely whether damage was caused (2 corrupt groups) or no t. Everything rests on conjecture, except that owner left the property intact and returned to find it a shambles. It seems, therefore, that if it is decided that denial of the type usually covered by this expression should be settled by this Government instead of by His Majesty's Government, it may open the door to reconsideration of the whole question of compensation for war damage with its potential liability of £38,565,000 (sterling). This forfeit will be incurred if, as result of political pressure on Commissioner, report is published,
6. I would earnestly request that strongest possibla representations should be made to the Treasury with view to their acceptance on behalf of His Majesty's Government of all claims of type indicated in my telegram No. 406, Quite apart from unpleasant political repercussions, I am very much afraid that other decisions may finally involve both His Majesty' a Government and this Government in expenditure of very considerable magnitude,
(36)
7. My telegram No. 406 was despatched from here marked (36)
most immediate,
Copies sent to:
Treasury
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1 i 1
Mr. Crombie,
Mr, Pitblado.
Mr. D.R. Serpell, 0.B.2.