CO885-(16-18) — Page 8

PUBLIC RECORD OFFICE

C.O.

Reference :-

.885

ALLY WITHOUT PERMISSION OF THE BE REPRODUCED PHOTOGRAPHIC-

COPYRIGHT PHOTOGRAPH—NOT TO

16 PUBLIC

RECORD OFFICE, LONDON

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(3) British firm's branch office in another British dependency (say in

Nigeria).

(4) British firm's branch office in Allied territory. (5) British firm's branch office in neutral territory.

(6) British firm's branch office in enemy territory occupied by British

Forces (say in Western Togoland).

(7) British firm's branch office in enemy territory occupied by Allied Forces

(say in Eastern Togoland).

B. Allied firm's head office or branch offices (analogous to A. above) C. Neutral firm's head office or branch offices (analogous to A. above)

Sonie of these combinations need not, however, be considered in the present

connexion.

5. In order to guide him in dealing with the cases which have arisen or may arise for settlement by this Department. Mr. Bonar low would be glad to be favoured with your opinion on the following questions

I. Enforceability.

(1) Is there any objection in law to the distribution of the assets of a branch of an enemy firm in any given British dependency in satisfaction of debts created i

(a) the head office of that firm in enemy territory, or

(b) a branch in another British dependency;

(c) a branch in Allied territory;

(d) a branch in enemy territory occupied by Bri

(e) a branch in neutral territory

and owing to the head office of a British firm?

¿Allied forces;

(2) Similarly, is there any objection. where the creditor is not the head office

of a British firm, but a branch of the firm situated either

() in a British dependency other than that in which the branch is situate of

the enemy firm whose assets are being distributed;

(b) in Allied territory; or

(c) in enemy territory occupied by British or Allied forces; or (d) in neutral territory?

(3) What is the answer as regards distribution of assets in cases similar to (1) and (2) above, except that the creditor is an Allied firm instead of a British firm?

(4) What is the answer as regards distribution of assets in cases similar to (1) and (2) above in cases where the creditor is a neutral firm, having regard to the fact that neutral creditors have a legal remedy which is not open to British or Allied creditors!

II. Pooling and Priorities.

(5)--(a) Should the assets of each branch be dealt with separately and applied in payment of debts due by it, and of those debts due by its head office or other branches for payment of which application is made to the Receiver; or

(b) Should the assets of all branches in British Colonies in West Africa of any given enemy firm be pooled; or

(e) Should the assets of each branch be applied first to creditors of that branch. and the surplus, if any, be pooled with the surpluses of other branches for the satis faction of the other creditors?

(6)—(«). In each case should the assets (or the surplus assets. as the case may be) be remitted to the United Kingdom for distribution!

(b) What priority or priorities, if any, should be recognised?

(In this con

nexion it should be observed that the rules as to priorities in bankruptcy differ in the various West African dependencies, and differ in those dependencies from the rules observed in this country).

7) What legislation would be necessary--

(1) by the Colonies concerned,

(2) by Parliament

in order to carry such a distribution into effect? (Copies of the local legislation

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under which these liquidations are taking place were enclosed in the letter from this Department to your predecessors of the 29th of April).

6. In replying to questions 5 and 6 you should bear in mind that some debts owing to branches will probably have been paid in full out of the assets of these branches, in pursuance of the instructions contained in the Secretary of State's despatch of the 10th of June. Telegrams have, however, now been sent to the various Governments concerned directing them, where payment has not already commenced, to make no payments pending further instructions.

any

7. Mr-Bonar Law would be glad if you would also favour him with observations that you may see fit to make on any points involved which may not be further directly raised by the above questions. I am to request that an early reply may be returned to this letter.

I am, &c.,

H. J. READ,

56578.

REPORT.

For the Under Secretary of State.

Our predecessors advised upon the footing thats the effect of the Ordinances and Orders under consideration is to give the Controller or other officer a discretion as to what debts he shall pay; and they considered that on grounds of convenience and justice the debts locally contracted should alone be paid out of the local funds. There is no doubt as to the convenience to the local officers of giving priority to the debts locally contracted; but this course involves considerable hardship to British firms. For instance a German firm having its head office in Hamburg with a branch in Nigeria may have (a) purchased goods from a British firm for delivery to the Nigerian branch and (b) purchased through the Nigerian branch goods from a neutral firm to be delivered in Hamburg. both purchases having been made on credit and the goods having been delivered. In such a case the goods bought from the British firm would be sold to free the German from the debt to the neutral, the British firm having to go without payment. Probably it was thought that the sums involved were small; but now that serious complaint has been made by British traders, we think that the matter might be reconsidered.

The legal position appears to be as follows:-

The Nigeria Ordinance authorises the Supreme Court of Nigeria to appoint a receiver of an enemy business with such modifications of the ordinary powers and duties of a receiver as the Court may think fit; and by the Order which is before us that Court appointed a receiver of an enemy business with power" out of the assets of the firm to pay any debts owing or which may become due and owing by the said firm other than debts to enemies.

The Sierra Leone Ordinance authorises the Supreme Court of Sierra Leone to appoint a controller of an enemy business with such powers as the Court may think fit including power for the payment of debts lue to friendly neutral or British creditors "; and by an Order which is before us that Court appointed a controller of an enemy business with all the powers set out in sections 6 and 7 (1) of the said Ordinance" which included the above power.

The Gold Coast Colony Ordinance authorises the Governor to appoint a control. ling officer and to order that the property of an enemy firm shall be taken possession of by the controlling officer, and provides that the controlling officer may out of the monies realised from the property of an enemy owner pay all admitted debts to British friendly and neutral creditors," and shall pay all monies remaining "after payment of such debts

and certain expenses to the Treasurer of the Colony who

shall dispose thereof in such manner as the Governor may direct.

It will be noticed that in none of these Ordinances and Orders is any distinction made between debts locally contracted and others, the only distinction being between debts due to an enemy and debts due to British, friendly, and neutral creditors; and no express power is given to the receiver or controller to prefer one creditor to another. This being so, it appears to us that the distribution of the assets among creditors

* See No. 183.