cms
Ref.:
CO 537/1369
THE NATIONAL ARCHIVES
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restrictions. Further information is given in the enclosed Terms and Please note that this copy is supplied subject to the National Archives terms and conditions and that your use of it may be subject to copyright of supply of National leaflet.
00165
Hong Kong Duress Notes.
161 4
A discussion took place on the above subject on 5th February.
Present:
Mr. Caine
Sir E. Reid
Mr. M.E. Muriel
Mr. J.R. Jones
Mr. J.B. Williams.
Hong Kong and Shanghai Banking Corporation.
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cms
Ref.:
CO 537/1369
THE NATIONAL ARCHIVES
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restrictions. Further information is given in the enclosed Terms and Conditions of supply of National Archives' leaflet. Please note that this copy is supplied subject to the National Archives' terms and conditions and that your use of it may be subject to copyright
Mr. Caine explained the position of Government in this matter, which was broadly speaking that, on the one hand, under the arrangements adopted in 1935, the Government regarded themselves as sharing with the Bank responsibility for the note issue and were in particular responsible for the solvency of the exchange fund, while, on the other, they had a general political interest in the soundness of the currency and in the treatment of holders of notes.
From both points of view the Government had come to the conclusion, in the light of the situation that the duress notes could not in practice be distinguished from other notes owing to the success with which numbers and signatures had been altered, that the right course was to validate duress notes, though they did not accept the view that this validation should be solely at the expense of Government. In the view of the Government the liability should be shared between Government and the Bank according to some such general formula as had been suggested to Mr. Morse.
The representatives of the Bank said that they also were of opinion that the notes should be validated, but they had also to consider the financial position of the Bank and the views of its shareholders. While, therefore, they might agree in principle that, from the point of view of the Bank itself, it was desirable in principle that the notes should be validated, they could not agree that this should be done if the resultant liability placed on the Bank were excessive. Moreover their own legal advice was to the effect that the Bank was probably not legally liable for these notes. In these circumstances, it would be very difficult to explain to the shareholders why the Directors recommended accepting a substantial share of the liability for the notes.
In further discussion on this point the representatives of the Bank agreed that the only way in which their view could be finally tested was by decision in the courts. Until, therefore, the matter had been tested in the courts, there would be, if the Bank refused to come to an arrangement with Government and Government itself took no further action on the lapsing of the proclamation about the notes issued by the military Government, a possibility hanging over the Bank that they might be made liable for the full value of all the duress notes.
The representatives of the Bank also agreed that as there was so strong a financial inducement, it could be taken as reasonably certain that if the notes were not accepted at their face value by the Bank the matter would be tested by some claimant in the courts.
There was also a good deal of discussion on the
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