CO537-4841 — Page 44

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communication was clearly also made on the footing that if the

Nationalist/American side took proper steps injunctions

would remain in force freezing the aircraft at Hongkong until

the last appeal had been exhausted and the matter was finally

decided.

4th January Chinese Nationalist Ambassador put in a note to

the Foreign Office atating:-

(1) that the 20% Pan-American interest in CNAC had been

transferred to CAT. INC;

(2) that CAT. INC. now re laced CAT (Chennault and Willauer);

(3) that the Republic of China had sold to CAT. INC. all

assets of CNAC and CATC.

This was telegraphed to Hongkong.

January 4th. General Donovan, who had been retained by Chennault

and Willauer to endeavour to secure the release of the

CNAC and CATC property, went to see the Governor of Hongkong

accompanied by U.S. Consul General. In an interview

which lasted fifty minutes, General Donovan informed the Governor

that the Foreign Office had received from the Chinese Embassy

a certificate certifying the sales of the 'planes to CAT. INC.

The Governor said he had heard something of this but the

whole question as to the title to the 'planes was sub judice.

He said he would, however, be advised by the Attorney General.

Later in the same day Donovan and Hepner went to see the

Attorney General. The Attorney General asked why cases Nos.

1, 2 and 3 were not bein proceeded with. General Donovan

replied that these cases were now "dead from the neck up" in view

of the sale of all the assets of CNAC and CATC to American

interests. The chief point made by General Donovan in a long

and far from pleasant interview was that the certificate by

the Chinese Nationalist Government that the 'planes were now

the property of CAT. INC. ought to be regarded as conclusive

of all legal issues, ao conclusive that the Governor of Hongkong

could disregard the injunctions made by these courts which

were still in force and could, and should, by police action if

/necessary