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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

possible fix such a rate it is considered any proposal to apply sliding scale to capital payments be inequitable for reason stated in paragraph 4 of my savingram 1963 repeat 1963 (group corrupt).

5. Our proposal therefore is that all capital payments in respect of bank liquidation should be regarded as postponed in that they were not made to bank at all but to liquidatorwho could not by any stretch of imagination be regarded as authorised agents of bank and who did not apply them in discharge of bank's liability. Bank therefore in fact derived no benefit from them,

6. Any other repayments of capital sums which were not due would stand unless reppened by parties concerned. There are very few and it is improbable many would be reopened.

7.

It is noted from War Office telegram 52736 F5 March 28th that it may be necessary Government concerned consider compen- sation in cases where heavy loss is caused not so much by action Japanese as by action Government in deciding on a policy which is not in accord with existing law. Both Law Officer of Crown and independent lawyers here are unanimous (group corrupt) that bank liquidation in form in which it was carried out was illegal. It seems likely therefore that if sliding scale proposal were agreed to Hong Kong Government would find itself in position having to pay compensation to bank. It is strongly felt that if we are to be placed in this position policy to be adopted should be within our colonies subject of course to any modification which may be possible in order to bring it into line with policy adopted

by His Majesty's Government elsewhere.