CO129-622-6 Claims of War Supplies to Eastern Group Supply Council 21-1-1949 - 23-12-1949 — Page 29

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8.

You have already been made aware in paragraphs 7 to 10 of my despatch No.15 of 28th January, 1948, of the main points of the claim by the Hong Kong and Shanghai Bank against this Government. This claim differs in degree from the others inasmuch as the legal obligation to meet the claim rests with the Hong Kong Government rather than with the War Supplies Board, a situation that arises from the exceptional method of financing this transaction which was adopted by the War Supplies Board with the concurrence of this Government. Although there is no doubt that the transaction was undertaken on behalf of the Government of India through the Eastern Group Supply Council, unfortunately this Government cannot produce evidence to this effect. A request in 1947 for copies of relevant papers addressed to the Department of Supply, Government of India, never received an answer. It is only with the concurrence of that Government that the claim against it can be established, owing to absence of local records. If, as seems likely, the Government of India repudiates this claim, even were it established, responsibility for payment will rest with the Hong Kong Government unless the Ministry of Supply accepts responsibility as I consider it should. credit balance of £15,527 on 25th December, 1941, (later liquidated by the Japanese) was in a Government account containing the moneys received from local manufacturers against the purchase of the processed yarn. No instructions had been given to the Bank to offset it against the Bank's loan and therefore the Bank was perfectly correct in omitting it from its account when submitting its claim. As, however, there is little doubt that it was ultimately destined as part of the repayment of that loan, it may be possible to get the Bank not to stand on its legal rights and to reduce its claim by the amount shown. I shall open negotiations to this effect but in the face of the Ministry of Supply's insistence on payment only of its strictly legal obligations it may be difficult for the Bank to surrender its own legal position.

9.

The

There was a transaction of a nature somewhat similar to that referred to above which has not been mentioned so far in this correspondence. I refer to the claim by this Government against the War Office for railway material manufactured through the agency of the Kowloon-Canton Railway at the instance of the

(11) 54447/5/49 War Supplies Board. In my savingram No.974 of 25th November,

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1949, I have agreed to the interim settlement proposed by the War Office, which amounts to little more than one quarter of the original claim for £108,000, because, owing to destruction of documents, it proved almost impossible to substantiate the claim. It is, I fear, unlikely that further evidence regarding this claim will materialise, and the interim settlement may very well have to be accepted as a final settlement. Fortunately the public has little knowledge of this claim and I propose to omit it from any general statement which may be made later, but the ungenerous terms of its settlement which has undoubtedly benefited the Treasury could reasonably be offset by a more generous attitude to the Hong Kong and Shanghai Rank Claim by the Ministry of Supply.

10.

I propose not to pursue the claim for £945.0.0₫ which is referred to in paragraph 6 of your despatch No. 87 of 21st April, 1949.

11.

If the Ministry of Supply is willing to accept liability in the first instance for the outstanding "A" claims