CO885-(15-16) — Page 693

PUBLIC RECORD OFFICE

Reference :-

mimimmim

TTIC.O.

.885

16 PUBLIC RECORD OFFICE, LONDON

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH-NOT TO

2

6. Even if debts due by head offices in enemy territory are not to be paid, it may prove that the assets of a branch in Colony A are insufficient to pay off the debts due directly or locally by that branch, but that a branch of the same firm in Colony B has a surplus. It will then be necessary to decide-at any rate, unless the assets are remitted to England for distribution-whether the assets of the two branches are to be pooled or not.

7. Mr. Harcourt would be much obliged if you would take these matters into your consideration, and favour him with your report on the following questions:- (1) Assuming that on the liquidation of branches in British West Africa of enemy firms in Europe any distribution of assets is to take place in British West Africa,

8.

(a) Should the assets of each branch be dealt with separately, or should the assets of all branches in British West Africa of one enemy firm be pooled and dealt with collectively?

(b) If the assets of each branch are dealt with separately, should priority be given to debts due to the local Government and local traders or any other, and, if so, what, classes of creditors?

(c) If the assets of all branches of an enemy firni are pooled, what priorities (if any) should be allowed?

(a) Can debts due by an enemy firm in Europe (i.e., the "head office") to British firms or to firms of allied or neutral nationality be made to rank against the assets of any individual branch of the enemy firm or of all its branches collectively in British West Africa?

(2) Should the balance remaining after any distribution of assets in British West Africa, or (if in your opinion any distribution by the liquidators in British West Africa is undesirable) should the whole of the assets, be held by some local authority (on the analogy of Section 5 of the Trading with the Enemy Amendment Act, 1914) until the termination of the war, or transmitted to this country with a view to distribution here?

(3) If the latter proposal were adopted,

(a) What classes of creditors should be allowed to claim, and what priorities (if any) should be recognised? (cf. Question 1 (c) and (d).)

(b) What legislation would be necessary (1) by the Colonies concerned, (2) by Parliament, in order to carry such a distribution into effect.

The Secretary of State would be glad if you would also favour him with any further observations that you may see fit to make on any points involved which may not be directly raised by the above questions, and if you could let him have a reply to this letter as soon as possible, as a decision as to the procedure to be adopted is somewhat urgent.

I am, &c.,

H. J. READ,

for the Under-Secretary of State.

3

would probably contain the bulk of the claimants. There is the further possibility that the Nigerian branch of this firm may be unable to pay its Nigerian creditors in full while the Sierra Leone branch may have a surplus after having paid its local creditors. We think there should be one, and only one, broad distinction drawn between the various classes of creditors, namely, between-(4) those who have had transactions direct with the branch in question wherever they may be resident and whether they be British, allied, or neutral; and (B) those who have had transactions with other branches or with the head office. It seems to us that this distinction is Justified on two grounds, one of expediency, the other of justice:

(1) On the ground of expediency because the debts of Class A are those which are readily provable by the books of the branch in question.

(2) On the grounds of justice because Class A are those who would, in the ordinary course, have been paid by the branch and who looked to the branch for payment.

On the other hand, a Sierra Leone creditor of a Sierra Leone branch can have no greater claim on the assets of a branch in Nigeria than a creditor in England of the head office. This seems to us to be conclusive against any pooling arrangements of the assets of African branches for the general benefit of African creditors.

There is the further consideration that neutral creditors of the head office have still got their remedy against the head office. This would necessitate a distinction between British and neutral creditors of the head office if either were to be let in against the assets of a branch.

Having regard to these considerations we think the questions asked should be answered as follows:-

Question 1 (a). The assets of each branch should be dealt with separately.

(b) The assets should be applied in respect of debts incurred directly by that branch to creditors wherever resident without any priorities other than those allowed by the bankruptcy or winding-up laws in operation in the Colony.

(c) Does not arise.

(d) In the ordinary state of things a creditor of a firm may pursue his remedy against that firm wherever a branch is found.

The effect of the Ordinance and Orders at present under consideration is to give the Controller a discretion as to what debts he shall pay, and we are of opinion that that discretion should not be exercised in the case of debts other than those directly contracted by the branch with which he is dealing. The debts which he should pay are those which in the ordinary course have been payable by the branch. Question 2. The balance should be held by some local authority until the termination of the war--preferably the Treasurer, of the Colony, as provided for in the Gold Coast Ordinance.

Question 3 (a) and (b). Does not arise.

Law Officers' Department, 25th May, 1915.

JOHN SIMON.

STANLEY 0. BUCKMASTER.

24554

REPORT.

We have considered the question as to what distribution of the assets of these firins should take place, having regard to the fact that as against a given firm, with a branch, say, in Nigeria, there may be

1. Creditors in Nigeria who have had transactions direct with that branch; 2. Creditors in, say, Sierra Leone, who have had transactions direct with the Nigerian branch;

3. Creditors in, say, Sierra Leone, who have had transactions with a branch

of that firm in Sierra Leone;

4. Creditors in Europe who have had transactions direct with the head office

of that firm in Europe;

and that these various creditors may be British, allied, or neutral persons. Class 4