60
abbana
PECORD OFFICE
انيليا
Peference —
C.O.882
882/12
PUBLIC RECORD OFFICE, LONDON
CALLY WITHOUT PERMISSION OF THE RE PEPRODUCED, PHOTOGRAPHIC - COPYRIGHT PHOTOGRAPH-NOT 10)
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the Treasury and the Debenture-holders on the one hand and the Perak Government on the other. If any such conflict of interest arose, the Colonial Office might be put in a somewhat difficult position. On the one hand the Secretary of State as a member of His Majesty's Government in the United Kingdom would desire to do nothing which might be detrimental to the interests of the Treasury, but on the other hand he would feel it his duty adequately to protect the interests of the Federated Malay States and Perak Governments. In such circumstances the Secretary of State would; I submit, be well advised to seek on behalf of the Federated Malay States and Perak Govern- ments the best independent legal advice available, before coming to a decision affect- ing the interests of those Governments. Bearing these considerations in mind, I share the doubts of the Legal Adviser as to whether the assurance asked for by the Trade Facilities Act Advisory Committee in paragraph 3 of their letter of the 10th February, 1932,* should be given, and I support the Legal Adviser's suggestion that Messrs. Burchells be asked to advise you on the question raised.
4. The question of the possible reconstruction of the Company cannot be ignored in view of the fact that it is badly over-capitalized and that there is little hope of its ever repaying the whole of its loan capital and interest, while the prospect of payment of dividends on the share capital is still more remote. I therefore ask that Messrs. Burchells be asked to advise generally as to the best line to be taken by the Federated Malay States Government as third chargees and by the Perak Govern- ment as grantors of the concession and lessors of the land occupied by the Company in the event of a reconstruction of the Company or a forced sale of its undertaking becoming necessary. I would ask that Messrs. Burchells consider with special care the provisions of Clauses 21, 23, and 31 (iii) of the Concession Agreement.
5. I desire to emphasize the importance of full support being given by the Colonial Office to the interests of the Federated Malay States and Perak Governments, where those interests conflict with the interests of the Treasury and of other parties. In this connexion I invite attention to the following matters, which tend to show that the interests of the Federated Malay States and Perak Governments have not in the past been adequately protected :--
(a) When the Federated Malay States made the loan of £850,000 to the Com- pany its charge was made subject to the charge guaranteed by the Treasury. It seems probable that had this money been advanced by a private syndicate it would not have been forthcoming except by way of first charge, in front of the charge guaranteed by the Treasury. It may be noted that, when later the Prior Lien Debenture issue was made, the lenders secured a first charge on the assets of the Company.
(b) The terms of the 1931 scheme of arrangement are not as favourable to the Federated Malay States Government as they should have been. Loan monies are payable in the following order: (1) Prior Lien interest; (2) Prior Lien sinking fund; (3) Guaranteed debentures interest; (4) Guaranteed debentures sinking fund; (5) Federated Malay States Loan interest; (6) Seven per cent. debentures interest; (7) Federated Malay States loan capital repayments; (8) Seven per cent. debentures sinking fund. In my view the capital repayments to the Federated Malay States should have come in before the interest on the seven per cent. deben- tures. Further, there seems to be no good reason for the provision that arrears of interest due to the Federated Malay States and current interest on the seven per cent. debentures are after 1934 to rank pari passu. (c) Some two or three years ago the Company demanded that the Perak Government should issue to the Company permanent titles for its land instead of leases. This demand which is quite incompatible with the terms of the Concession Agreement was not seriously resisted by the Colonial Office and was only rejected after serious protests emanating from the Perak and Federated Malay States Governments which were in lue course referred to and supported by Messrs. Burchells.
(d) There is now under consideration a proposal that the Company should purchase the electric power station belonging to Malayan Tin Dredging Company. Limited. Considerable pressure has been and is being brought to bear on me to consent to this proposal, despite the fact that it is the considered opinion of myself and my advisers that the proposed purchase is against the interests of the Federated Malay States Government.
* C. 92302/1/32 [No. 1]: not printed.
4.
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6. The Legal Adviser has in his Memorandum I set out at length the differences between the English law of mortgages and the local law relating to charges of land. This local law appears to have been consistently ignored by the London solicitors who have acted for the various parties. You will no doubt in due course cause the sub- stance of the Legal Adviser's observations to be communicated to the Company, the Treasury, and the three Trustee Corporations. and will advise me whether or no the Trustee Corporations desire to secure statutory charges over the Company's lands.
7. The Legal Adviser's Memorandum II gives in some detail the position with regard to titles for the Company's lands. In regard to the Chenderoh Dam site, the Malim Nawar steam station site and various sub-station sites titles either have been or can shortly be issued.
8. With regard to the inundation area I should be glad if you would take steps to obtain the consent of the Company and of the three Trustee Corporations to the proposal that no titles should issue for this area. If such consent is not forthcoming, the Company must deposit survey fees in order that a lease may be issued in pursuance of the terms of the Concession Agreement.
9. The position with regard to the land over which the transmission lines pass
is somewhat confused, and the Legal Adviser's observations in paragraphs 13 to 18 of his Memorandum II should be brought to the notice of the Company, the Treasury, and the three Trustee Corporations.
10. In conclusion I would observe that there has been in recent correspondence a tendency to present the views of the Treasury only, as if the Treasury were the only party concerned. It is, however, clear that any agreement relating to titles and charges must be concurred in by the Company and the three Trustee Corporations, and I trust that for the future this fact will not be lost sight of in the Colonial Office.
I have, &c.,
Enclosure 1 in No. 24.
MEMORANDUM I.
C. CLEMENTI.
High Commissioner.
BEFORE Commenting on the Trade Facilities Act Advisory Committee's letter
of the 10th February, 1932, it seems advisable to give a financial and legal history of the Company in order to ascertain the legal relations of the various parties.
2. The preliminary agreement between the Perak Government and Sir W. G. Armstrong. Whitworth, and Company, Limited, was signed on 12th December, 1925, and had attached thereto a draft of the Concession agreement which was ultimately executed by the Perak Government and the Perak River Hydro-Electric Power Com. pany (hereinafter called "the Company "). It is I think admitted that the rights and liabilities of the Government and the Company under the Concession agreement date back to the date of the preliminary agreement, i.e., the 12th December, 1925, and are not affected by any engagements entered into by the Company after its incorporation in July, 1926.
3. The rights of Sir W. G. Armstrong, Whitworth, and Company, Limited, were on 1st June, 1926, assigned to Malay and Eastern Power Development Company, Limited, which company on 26th July, 1926, assigned its rights to the Company.
4. The Company was incorporated on the 24th July, 1926. The authorized share capital of the Company is £500,000 in cumulative preference shares, the whole of which issue was taken up by and is owned by the Federated Malay States Government and £500,000 in ordinary shares, of which £431,000 only has to date been issued The loan capital amounted to £2,600,000 as hereafter set out.
5.
On the 26th July, 1926, the Company executed an agreement with the Treasury by which the latter under the Trade Facilities Act, 1921, agreed to guarantee the interest on £1,250,000 5 per cent. Debentures to be issued by the Company. This agreement was modified by ค supplementary agreement dated the 25th February, 1931. executed in accordance with the scheme of arrangement referred to later.
6. On the 5th November, 1928, the Concession Agreement having been executed by the Perak Government in the previous June as an Escrow was executed by the Company.