273
PUBLIC RECORD OFFICE
19
Reference :--
CO.885/25
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-
COPYRIGHT PHOTOGRAPH-NOT TO
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[To Straits Settlements only: of all debts of the liquidated firm, whether incurred in respect of the trade carried on by the firm in the Colony or otherwise.]
My reference to this subject was due partly to my desire that the greatest. possible advantage to non-enemy creditors should be secured from the [To Hong Kong and Straits Settlements only: increase of] available assets [T'o Hong Kong and Straits Settlements only: which the change of policy indicated in my telegram might be expected to produce], and partly to certain advice which I had recently received from the Law Officers of the Crown in connexion with the liquidation of enemy firms in British West Africa.
6. I was informed that in West Africa, with few exceptions, all European firms having establishments there control the business of these West African branches very closely from the head offices in Europe, that the staff of these branches consists of a local manager (who is practically never a partner in the firm) and his subordinates, and that even the manager is usually given but little discretion. In the case of trading firms, he sells the goods which the head office sends him from Europe or the United Kingdom, and he consigns to the head office, or to its order, the produce which he buys from the native producers or middlemen, and the head office disposes of such produce. As a result, practically all the wholesale trans- actions take place, not between the branch in West Africa and other firms in West Africa or Europe, but between the head office and other firms in Europe (including in this term the United Kingdom). Accordingly, in the case of German or other enemy firms established in British West Africa, most of the debts due to manufac- turers in the United Kingdom for goods which have been supplied before the War to branches in liquidation in West Africa are due by the head offices in enemy territory in Europe, with whom alone the British manufacturers have had con- tractual relations; and the same is probably to a large extent the case with debts due by firms in the United Kingdom in respect of produce exported from British West Africa by the branches now in liquidation of enemy firms.
7. On this statement of facts the Law Officers advised* :-
(a) That in the case of a branch of an enemy establishment having a head office in enemy territory the liquidators should pay out of the assets of the branch not only debts directly incurred by the branch but also debts incurred by the head office or by other branches of the same firm established outside the Colony concerned.
(b) That neutral creditors should only be allowed to prove their debts after
they had exhausted their remedy against the firm in enemy territory. (c) That where there are different branches of the same enemy firm in different colonies the assets should be pooled after payment of preferen- tial claims in each case.
[To Hong Kong and Straits Settlements only: 8. I am not aware to what extent the assets available for distribution under the system in existence at the date of my telegram had been distributed at that date, nor what may be the value of the addi- tional assets which the change of policy indicated in my telegram may make avail- able. Nor have I any means of estimating how far the admission of the new claims referred to in my telegram to rank pari passu with the claims which had been admitted under the existing system would result in a deficiency of assets in any given case I thought it best, therefore, to indicate to you my desire that, subject to the reservation mentioned in my telegram in regard to neutral claims, as large a class of non-enemy creditors as possible should be admitted to share in the assets, and to leave it to you to decide whether the new classes of claims referred to should be admitted to rank pari passu with the claims directly connected with the branch or whether such last-mentioned claims should be given priority. Should you decide to extend the class of debts to be admitted in accordance with the suggestion made in my telegram you may think it desirable to issue an advertisement inviting fresh claims, and, should you think it desirable, I will, on hearing from you the date by which claims are to be sent in, and the kind of claims which it may be decided to admit, issue advertisements in the Press in this country.]
[To Ceylon only: 8. In the absence of any information as to the financial condition of the enemy firms in Cevlon I thought it best to leave it to vou to decide whether all admissible claims should be allowed to rank pari passu or whether claims in respect of debts incurred by, or on behalf of, a branch in the Colony should be given priority.]
*Sec No. 193 in Vol VII of Law Officers' Opinions."
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9. With regard to the Law Officers' recommendation (b) above, I understand the Law Officers only to have intended the postponement of neutral claims to take place where such claims are primarily enforceable against the enemy firm in enemy territory and not where such claims are in respect of debts incurred directly by, or on behalf of, the branch in liquidation, and I have so interpreted the recommenda- tion. I have also assumed that by neutral creditors the Law Officers mean firms whose head offices are in neutral territory.
If
10. As to the Law Officers' recommendation (c), above mentioned, the Law Officers, in recommending this course for West Africa, had suggested that the liquidator, after satisfaction of the preferential claims against a branch (meaning by that expression all claims which may be given priority over the ordinary unsecured debts of the firm), should arrange either to pool the surplus funds so far as required to pay the other debts or to keep one another informed of the payments made, and to be made, to creditors, and the amounts of the assets available to meet debts. the latter procedure were adopted, which is, I gather, the course favoured by the Law Officers, there would be a kind of paper pool. If the assets of any one branch of a firm were insufficient to allow of payment in full of the claims presented against it, it would be settled between the various liquidators what dividend the total available assets of the various branches would give when distributed among all the non-preferred creditors ranking against the firm. Creditors who had originally claimed against a branch the assets of which were of themselves insuf- ficient to pay such a dividend would then be directed to apply to the liquidator of a more prosperous branch of the same firm in another Colony.
11. I have no means of judging how far any kind of pooling of the assets on these lines may be necessary, nor whether any arrangement of the kind suggested by the Law Officers would be practicable between the Eastern Colonies; I therefore thought it best to suggest that [To Hong Kong and Straits Settlements only: you] [To Ceylon only: the Governors of Hong Kong and the Straits Settlements] should endeavour to arrange some convenient system in communication [To Hong Kong and Straits Settlements only: with the Governor of Ceylon.] [To Ceylon only': with yourself.]
12. You will no doubt find it necessary to issue public advertise- ments inviting claims against the liquidated firms and notifying the date by which claims must be sent in. As some at least of the enemy firms have been allowed to continue trading during the war it will be necessary for you to consider what course should be taken with regard to the carrying out of current contracts by those firms. Subject to anything you may have to say to the contrary, I am of opinion that the course recommended by the Committee in connexion with the liquidations in Hong Kong should be sufficient for Ceylon also. Any advertise- ments issued should make plain the class of debts which will be allowed to be proved and the policy adopted for dealing with current contracts. As it will be desirable that similar advertisements should be issued in this country I shall be glad if you will report to me by telegraph as soon as possible the names of the firms to be liquidated, the class of debts to be admitted, the persons to whom and the dates by which claims are to be sent in, particulars of the notification to be inade with regard to current contracts, and any other details which you may think desirable.
I have, &c.,
A. BONAR LAW.
8901
No. 28.
STRAITS SETTLEMENTS.
THE SECRETARY OF STATE to THE GOVERNOR. (Sent 6.56 p.m., 1st March, 1916.) TELEGRAM.
[Answered by No. 56.]
YOUR despatch 28th January, No. 32* Your telegram 26th February.t Question of Siemens is under consideration. Will reply shortly. Behn Meyer rubber factory should be treated on same lines as Singapore Oil Mills; see my telegram 21st February. Liquidation of any firm also trading in Hong Kong should not be completed unless both branches known to be solvent.-BONAR LAW.
‡ No. 28.
* No. 26.
+ 9407.