SAVINGRAM
To the Secretary of State for the Colonies.
From the Governor, Hong Kong.
Date
No.
48
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case, which of course does not exist in other War Supplies Board claims, is set out in paragraph 8 of my confidential despatch No. 212 of the 8th December, 1949. If at any time
54460/47 any doubt arises in the minds of those concerned that at
least the category A claims against the War Supplies Board will not he met in full, it is probable that pressure will be exerted against the Hong Kong Government to meet this particular claim in which they have a legal liability. Directly this happened, action in respect of denial claims would undoubtedly follow.
6.
I think you will agree therefore that the possibility that this Government might at short notice be required to pay out over twentysix million dollars is a fact which must very seriously affect its acceptance of any commitment to contribute towards the cost of reinforcing the Garrison. You have suggested that this di. Ticulty could be met by a subsequent adjustment in the rate of the contribution, but if this Government had actually made a substantial payment towards the cost of reinforcements and immediately afterwards was forced to pay out over twentysix million dollars in connection with these claims outstanding from the last war, serious financial embarrassment would result.
7.
It is naturally expected that any such payment would be refunded by His 'ajesty's overament, but there mi ht be considerable delay over this. As I have pointed out on previous occasions. failure on the part of His Majesty's Government to accept responsibility for these denial claims wo ld have political repercussions of a very serious nature, and enemies of the British Empire wo lá not be slow in aking use of the excellent proparanda aterial with which they would be presented. So long as the present delicate political sication continues, it is impossible to fo ecast what the consequences of any serious agitation might be. The arguments in favour of the denial claims being
net in full by His Majesty's Government appear to he
nassailable. The main ones are :-
(1)
(11)
tat the requisitions were operated on the instructions of t. e 3ervice commanders and, in signing the te Civilian competent authority was merely acting as an agent of the Service commanders, because as has been explained in paragraphs 2 and 3 of t is savingram, ro Service competent authorities were designated;
that the denials were operated too late to affect the defence of Hong Kong, as capitulation was imminent. They could only therefore have been justified in that useful facilities were being denied to the Japanese which the latter mi ht have used to prosecute the war against China. Th 3 tie measure was not one of local defence, but connected with the wider strategy of te war. In these circumstances the
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