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maintenance of all buildings required for operational reasons in the border area. The latter is of course entirely consistent with the principle we have referred to above about financial responsibility for the local defence of overseas territorics. The Hong Kong Government's reason for declining to accept the charge for Operation Highland Bonnet is, it seems, not only that they were not consulted before the Highland Bonnet works were put in hand, but that the threat at that time was external
In the face and military whereas later it was not purely so. of these two arguments it is, it seems to us, very unlikely that we shall be able to pursue our claim against the Hong Kong Government to a satisfactory conclusion. Unless, therefore, it is judged to be tactically advisable to pursue the Highland Bonnet claim in order to improve the chances of success of the Snake Fence claim, we are content that you cease to pursue the former claim. It will of course be necessary to note, the outcome in the Ministry of Defence's Appropriation Acccunt in due
course.
5 Finally, we ought to add that this case once again illustrates the necessity to ensure that agreements involving public moneys should be firm, binding and clearly set out in writing. The PAC have made this general point several times; and MOD accepted it in their answer to the Committee's 3rd Report of 1967-68. (See PAC Epitome, Vol II, pp 526-7). We can however understand that the circumstances in Hong Kong in 1967 may not have been conducive to the final settlement of the
but with the benefits of financial arrangements at that time
hindsight it was perhaps unfortunate.
6
I am sending a copy of this letter to Miss Kelly, Hong Kong and Indian Ocean Department (FC0).
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MC SCHOLAR
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