35
273
PUBLIC RECORD OFFICE
Reference :-
TITLE CO.
885/25
PUBLIC RECORD OFFICE, LONDON
ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC- COPYRIGHT PHOTOGRAPH-NOT TO
16329
SIR,
To
No. 32.
CEYLON.
THE ACTING GOVERNOR to THE SECRETARY OF STATE.
(No. 130.)
(Received 31st March, 1916.)
[Answered by Nos. 40 and 42.]
The Queen's Cottage, Nuwara Eliya, Ceylon,
7th March, 1916.
Officer Administering Government, 10th February, 1916.
WITH reference to the telegraphic correspondence* noted in the margin, I have the honour to transmit to you a copy of a letter from the Attorney-General covering a memorandum on the subject of the difficulties in the way of an expeditious liquidation of the business of Messrs. Freudenberg & Company.
Officer Administering Government, 18th
February, 1916.
To Officer Administering Government,
22nd February, 1916.
2. You will observe that unless Mr. Philip de Silva is to be forced into bank- ruptcy, a course which would entail heavy loss on his local creditors, it will be necessary to allow a considerable time to elapse before any appreciable part of the eight lakhs of rupees originally advanced to him by Freudenbergs can be recovered.
Prima facie there is a good deal to be said for delaying matters until the local creditors, other than Freudenbergs, have been paid off, and then calling in the original eight lakhs. It is true that this would result in making Mr. Philip de Silva bankrupt, but, as in any case his financial position is obviously extremely unstable, this would probably amount only to hastening an inevitable catastrophe. It is true also that the result would be that Messrs. Freudenberg would lose the greater part of the eight lakhs, but I do not feel that they are entitled to much sympathy, as they seem to me to have taken advantage of Mr. de Silva's pecuniary difficulties to drive a very hard bargain with him. The real objection to such an arrangement is, however, indicated by the Attorney-General. Legal proceedings in this country are, as he says, dilatory in the extreme, and if this matter once gets into court as a bank- ruptcy case the final settlement of the Freudenberg affairs will be indefinitely delayed. Moreover, Mr. de Silva may take the view that if any such arrangement is adopted he will certainly become bankrupt in the end, and that it will, therefore, be better for him to admit insolvency at once; in which case the other local creditors will suffer.
3. I confess that at present I am unable to see my way to make any suggestions for dealing with this situation, but a good deal depends on the period within which it is considered essential that the liquidation should be concluded. I should be glad to receive your directions on this point, which arises also in connexion with the question dealt with in paragraph 5 of the Attorney-General's memorandum.
4. In paragraph 7 of the memorandum Sir A. Bertram refers to the difficulty of deciding what is the property of the firm and what is the private property of the partners. This question has doubtless arisen in England or in other Colonies, and I should be glad to be informed of the manner in which it has been settled.
5. I concur in the suggestion in paragraph 8 of the memorandum that the Controller of Revenue should be appointed Custodian of Enemy Property in order to supervise the liquidation of enemy firms.
6. I enclose also a copy of a letter from the Deputy Inspector-General of Police with regard to the enemy firms which were in existence when war broke out. It appears from this list which he gives that the property belonging to enemy firms is more extensive than I supposed when I wrote my despatch No. 97 of the 23rd of February, but further inquiry will be necessary to ascertain to what extent the assets referred to are the property of the firms and to what extent they are private property. Obviously the property of Karl Festin is private. So, apparently, is some at least of that shown under the name of Messrs. J. Hagenbeck, and probably the shares in Ceylon companies included here among the assets of Messrs. Freudenberg & Company. (The reference to the German Club is, I think, an error. I understand that the property is vested in trustees, among whom were one or more members of the Freudenberg firm.)
*Nos. 22, 24, and 8050.
+ No. 31.
I learn also from Messrs. Morrison & Bell, the chartered accountants referred to in paragraph 2 of my despatch No. 97,* that the final liquidation of the affairs of Messrs. George Boysen & Company will not be finished for some time, as they have found it necessary to give a good deal of grace to various debtors to enable them to discharge their indebtedness to the firm.
These facts, however, are of little importance, as the affairs of these firms are negligible compared with those of Messrs. Freudenberg. Any decisions on matters of principle taken in the latter case will, of course, apply to them, and their affairs can undoubtedly be wound up with much less delay.
7. I do not think there will be any need to adopt the system suggested in your telegram of 22nd February,† as, so far as I am aware, none of the enemy firms here have branches in enemy territory or in other British colonies.
8. You will observe that the assets of the enemy firms in Ceylon include several estates and (assuming that these are not the private property of individual partners) mills, and other buildings. Of these properties the most important are the Hults- dorff mills and Freudenberg's buildings. It might, perhaps, be possible to dispose of rubber and tea estates and the smaller mills locally at a fair price, but if the Hultsdorff mills and Freudenberg's buildings are put up for sale by auction locally there can be little doubt that the price which they would fetch would be so small that the proceeding would amount practically to confiscation. Few people, if any, would be in a position to pay a fair price for them, and the most probable result would be that they would be bought up at the lowest possible price by a ring of small capitalists.
In these circumstances I should be glad to be informed whether you consider that it would be practicable to advertise in England the intention to sell the more important properties and to invite tenders for them.
I have, &c,
SIR,
(Confidential.)
R. E. STUBBS, Officer Administering the Government
Enclosure 1 in No. 32.
Colombo, 29th February, 1918.
Freudenberg Liquidation.
WITH reference to your conversation with me in Nuwara Eliya, I enclose a nemorandum on the above subject.
2. I may add that I have ascertained from the Chairman of the Municipal Council that the assessed annual value of the Freudenberg building in the Fort according to the municipal assessment, is about Rs.50,000. Mr. Tonks informs me that the rental in fact derivable is about Rs.60,000. The mills are assessed at about Rs.40,000. But this is probably the lowest estimate.
I am, &c.,
The Honourable
The Colonial Secretary.
ANTON BERTRAM,
Attorney-General.
MEMORANDUM ON THE DIFFICULTIES IN THE WAY OF AN EXPEDITIOUS LIQUIDATION OF THE BUSINESS OF Messrs. Freudenberg & COMPANY.
1.
The de Silva Plumbago Scheme.-On 11th August, 1915, the Courts sanc- tioned a scheme having reference to the affairs of one Philip de Silva. Philip de Silva was indebted to Messrs. Freudenberg & Company to the extent of some eight lakhs of rupees.
He was also indebted to other creditors to the extent of a further five lakhs. Some of these creditors having taken proceedings against him, he had applied to the controllers to be further financed. The Court, having regard to the interests of Messrs. Freudenberg & Company under their agreement with Philip de Silva, sanctioned a further advance up to two lakhs of rupees. The other creditors were paid 15 per cent. on account and undertook to suspend their remedies
J
* No. 81.
t No. 24.