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RECORD OFFICE
ད།
لنسائي
Poftience -
C.O.882/12
PUBLIC RECORD OFFICE, LONDON |
ALEY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC –
COPYRIGHT PHOTOGRAPH-NOT 10
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7. On the 12th November, 1926, the Company executed a Trust Deed with Trustees Corporation, Limited, as trustees to secure the repayment of the sums due on £1,350,000 7 per cent. participating Debentures to be issued by the Company, on the terms that this security should rank next after the guaranteed issue referred to below. This deed was later modified by (a) 1st supplementary deed dated 30th June, 1929, (b) 2nd supplementary deed dated 29th January, 1930, executed in connexion with the Federated Malay States ioan referred to below, and (e) 3rd supplementary deed executed on 25th February, 1931, in connexion with the schieme of arrangement.
8. On the 30th November, 1926, the Company executed a trust deed with Whitehall Trust, Limited, as trustees to secure the repayment of sums due on £1,250,000 5 per cent. guaranteed Debentures guaranteed by the Treasury. This security ranked in front of the 7 per cent. participating Debentures and Trustees Cor- poration, Limited, was made a party to the deed for the purpose of assenting to this course. This deed was modified by a supplementary deed dated 25th February, 1931, executed in connexion with the scherne of arrangement.
9. On 29th January, 1930, the Company executed the Deed of Charge with the Federated Malay States Government to secure repayment of £850,000 lent by that Government. Trustees Corporation, Limited, was a party to this deed on behalf of the 7 per cent. participating Debenture-holders and it was therein agreed that the Federated Malay States Government should rank as second chargees in priority to the 7 per cent. participating Debenture-holders. This deed was modified on 25th February, 1931, by a supplementary deed executed in connexion with the scheme of arrangement
10. In 1931, the Company being again in financial difficulties, the scheme of arrangement, which appears as a schedule to the four deeds, and the agreement which were executed on 25th February, 1931, was drafted. Supplementary deeds and a supplementary agreement were on 25th February, 1931, executed by the Trustees for the 5 per cent. and the 7 per cent. Debenture-holders, the Federated Malay States > Government, and the Treasury and a further trust deed was executed by the Company with Royal Exchange Assurance to secure the repayment of £400,000 54 per cent. Prior Lien Debentures. The Trustees for the 5 per cent. and 7
per cent. Debenture- holders were parties to this deed and it was agreed that this security should rank in front of the other three securities above mentioned.
11. It will be observed that the loan capital now stands as follows:-
(a) 400,000 5 per cent. Prior Lien Debentures (trustees, Royal Exchange
Assurance);
(b) £1,250,000 5 per cent. Guaranteed Debentures (trustees, Whitehall Trust,
Limited);
(c) £850,000 Federated Malay States Government Loan;
(d) £1,350,000 7 per cent. Participating Debentures (trustees, Trustees Cor- poration, Limited) both (b) and (c) having lost their former priority.
12. It should also be noted that the Federated Malay States Government and/or the Perak Government, whose interests are identical (a) hold £500,000 cumulative preference shares, (b) are third chargees in regard to a loan of £850,000 to the Com pany, (c) hold rights under the Concession agreement which may be very valuable, and (d) will when leases are issued to the Company own the reversion of such leases. Under Clauses 23 and 31 (iii) of the Concession Agreement if the Company desires at any time to abandon its rights under the agreement or if it fails to produce and supply electricity for a continuous period of 12 months, all permanent works, buildings, and fixed machinery will revert to the Government free of charge, and in such an event the Government would only have to pay for such moveable plant and machinery as it took
over.
13. While therefore the Government as chargee may have an interest in common with the various series of Debenture-holders and the Treasury, as reversioner the Government's interests may in certain eventualities be in direct conflict with those of the Debenture-holders and the Treasury. It may be well that it would be a sound business proposition for the Government to take over the undertaking as a going concern on the terms indicated in the preceding paragraph, even at the cost of having to write off the £1,350,000 which has been invested in the undertaking and to make a further payment for the moveable plant and machinery.
14 In their letter of the 10th February, 1932, the Trade Facilities Act Advisory Committee ask that the High Commissioner will assure the Treasury that in the event of the Trustees for the guaranteed debentures having to enforce the security, his Government would not unreasonably or arbitrarily withhold its assent to a sale or assignment of the Concession to any reputable or responsible purchaser found by the Trustees.
4.
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15. In the first place it is not clear why such an assurance should be given to the guaranteed Debenture-holders (the second chargees) if it is not also to be given to the first and fourth chargees, i.e., the Prior Lien and the participating Debenture-holders. The existence of the prior chargee is ignored throughout by the Treasury.
16. In the second place it would appear to be inadvisable to give any such undertaking at all. Undertakings of this nature are liable to be twisted into legal agreements, and the Government having certain rights under the Concession Agree- ment should be careful to do nothing to prejudice those rights. This Government no doubt shares the hope of the Committee that circumstances will not arise affecting the Company in which the Treasury and the Government will not act in full co-operation and agreement and it will always no doubt be as willing to be bound by its legal liabilities as to enforce its legal rights, but it is submitted that it is under no duty to indicate in advance what its course of action would be in uncertain eventualities.
17. Having regard to the arguments set out above it is suggested that the Colonial Office should consult Messrs. Burchells on behalf of the Federated Malay States Government before coming to a final decision on the subject of th: proposed assurance. 18. The Committee in their letter under reference agree, on behalf of the Treasury, that no titles should be issued for the inundated area. It should, however, be noted that in default of agreement with all parties the Government is under a duty to issue titles for the area in question, and the Company is under a duty to pay for the survey fee. It will therefore be necessary to get the consent of the proposal of the Company and the three Trustee Corporations which represent the Debenture-holders. It is suggested that the Colonial Office take the necessary steps to obtain these consents. It will be remembered that the proposal was made in the interests of the Company in order to save the high cost of survey.
19. As regards the titles to be issued for land (other than the inundated area) occupied or to be occupied by the Company, the Committee appear to be under a misapprehension when they write that such limited titles do not appear to be capable of registration so as to enable a valid charge on the fixed assets to be created for, the Debenture-holders." There is nothing in the High Commissioner's despatches, Federated Malay States, Nos. 649 and 425, dated respectively the 4th October, 1930. and the 30th June, 1931, to give rise to such a suggestion.
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20. This Government is under the Concession Agreement under contract to the Company to issue leases for a period of 80 years from the 5th November, 1926, of such land as is occupied by the Company under the Agreement. The present position with regard to titles issued or to be issued to the Company is somewhat confused and a separate memorandum dealing with this question is attached.
21.
A specimen of the leases* which have been issued to the Company is attached
and it is proposed that future leases should be in the same form.
22. It will be noted that the specimen lease is more or less in the form of an English lease but here leases require registration before they are recognized by the State and become fully binding on the State and its lessees.
23. Once leases are registered it is possible to register charges in favour of the various chargees. It is not thought that the solution suggested by the Committee to register caveats is either practicable or desirable, more especially as there is no legal obstacle in the way of registering charges.
24. In view of the wide divergence between the local land law and the English law of mortgage, a short summary of the local law is given below.
25. A charge is in no way comparable with an English mortgage. The pro- prietor or (as in the case of the Company) the lessee has no legal estate which he can convey or demise by way of mortgage and the equity of redemption is unknown to the local law. The chargee has certain remedies but he is not in any sense the legal owner of the land.
26.
More than one charge can be registered in respect of the same land and in such a case the charges rank by priority of registration and not by priority of execution. This rule applies notwithstanding that a prior registered chargee has notice of an. umregistered charge prior in date of execution to his own. The English distinction between a legal and equitable mortgagee does not exist.
27. Practically the only remedy of the chargec in the event of default being made in payment of principal or interest is to apply by summons to the Supreme Court
* Not printed.