CO537-4841 — Page 43

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also that it could not be said that it was the defendants in

these cases who were ecusing delay because the plaintiffs

hed failed to file their pleadings. In the end both parties agreed to the indefinite continuance of the injunctions.)

27th December.

Chinese Embassy presented to the Foreign Office

certificates for the Chinese Nati nalist Government to the

effect that CAT (Chen ault and Willauer) hed purchased the assts

of CHAC and CATC. This information was transmitted by telegram

to Hongkong.

29th December.Willauer and Hepner saw the Governor of Hongkong

and informed him of the sale which had taken place on 12th

November. They indicated that this acquisition of the'planes

by Americans meant that U.S. markings would have to be put on these 'planes, but stated that they would await recognition by H.M.G.

of the validity of this sale.

30th December. U.S. Embassy asked the Foreign Office to recognize

the validity of the acquisition by American interest of the

assets of CNAC and CATC.

Foreign Office replied: (1) that the

certificates from Chinese Nationalist Government would be

made available to the court in Hongkong if the U.S. interest

wanted to adduce them there; (2) that the validity of the sale

was a cuestion for the court and not a matter for decision by

executive action.

January 3rd. The American Embassy who had previously requested

that the Hongkong Government should transfer the aircraft to the

American interest by legislative or executive action, were

informed by the Foreign Of ice that this was not possible and

that the legal proceedings in Hongkong must take their course. It

was pointed out that there were two appeals from any decision of

first instance the last to the Privy Council and that if all

appeals were exhausted the proceedings would probably take about a

year. (This communication must, of course, be understood

as meaning that this result of a delay of a period of a year

would naturally be dependent on the Nationalist/American side

taking all the steps open to them in the courts of Hongkong and

conducting their case with reasonable skill and prudence. The

/communication