15127/2/46.
00135
te
Colonial Office, Dover House, Whitehall,
London, S.W.1.
132
19
1st March, 1946.
PRIVATE and PERSONAL.
My dear MacDougall,
I m sorry that the matter of the duress notes has been so long delayed, but, as I intimated in my telegram of 12th February, Morse was quite seriously ill for three or four weeks. However, we have now come to definite agreement with the Bank, which I hope will be the end of the matter unless you at your end feel that the terms we have agreed are too generous to the Bank or in any other respect inappropriate.
Unfortunately, the basis of settlement set out in my letter to Hazlerigg of the 8th January turned out unacceptable to the Directors of the Bank. They put forward the alternative of a flat contribution by the Bank of £l million. In subsequent discussion we persuaded Morse to consider proforubly an additional contribution of a further million in the shape of a temporary increase in the Bank's fiduciary issue. After a good deal of discussion with him and with the Treasury, we have agreed terms which are set out in the
ttached copy of a letter written to the Bank. This was deliberately couched in formal and firm terms for the purpose of presentation to the Bank's Board. The Board met yesterday, and Morse has now replied in a letter of which I also enclose a copy, confirming their agreement to these proposals.
Subject to your comments es above, therefore, the way is now clear for a public announcement of a validation of these notes as soon as you wish to make it. Presumably there will have to be an amendment of the existing proclamation on currency, as to the terms of which Hazlerigg will no doubt advise. Morse is also anxious in connection with any public Ennouncement that it should either be issued jointly by the Government and the Bank, or that there should be simultaneous announcements. He has written to Fenwick authorising him to proceed on this basis, and I enclose this letter which you will no doubt puss on to Fenwick.
As regards the terms of the -nnouncement, I was not happy about the language used in the opening sentence of Morse's draft because we do not want to talk too much about the notes having been illegally issued. (There are three reasons for this. First, our case for getting the Bank to share in the loss rests at least partly on the possibility that the Bank itself could be held legally responsible; second, it might not be easy to distinguish what the Japanese did in Hong Kong from what we ourselves, or others of the United Nations, have done in enemy territories occupied by us: und third, if we talk too much about wrongful seizure of the notes, we may lend too much encouragement to other people whose property was seized by the Japanese to demand too much compensation.) Morse bas, however, agreed that the opening sentence should be amended to read us follows:-
Brigadier D. M. MacDougall,
Civil Affairs,
Hong Kong.
"Mr.
2
cms
CO 537/1369
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