SOUTHERN RHODESIA GOVERNMENT STOCK (Hansard, 18 April 1973)

§ THE LORD CHANCELLOR
My Lords, with the permission of the House, I would seek to make a Statement on the subject of Rhodesian stockholders. As I told the House on February 14—I think in answer to my noble friend Lord Napier and Ettrick—Her Majesty's Government have been considering the situation which arises from a number of Petitions of Right presented under the Colonial Stock Act 1877 by or on behalf of holders of Southern Rhodesia Government stock. Before U.D.I., the Government of Southern Rhodesia made a number of issues of stock in London. These issues are registered under the Colonial Stock Acts and the provisions of those Acts apply to them. The Bank of England is registrar of the stock, apart from one issue for which Barclays Bank International Limited is the registrar.
After U.D.I., the illegal Rhodesian authorities have not provided funds to the United Kingdom registrars to service the stocks. It is understood, however, that those authorities have made some payments in respect of interest and redemption monies for stock held by persons not resident in the United Kingdom. The total amount of arrears outstanding on these stocks is, I am informed, now £53 million.
Section 19 of the Colonial Stock Act 1877 requires the prospectus and other documents relating to stock to which the Act applies to state that the revenues of the colony alone are liable in respect of the stock and the dividends thereon and that the Consolidated Fund of the United Kingdom and the Treasury are not directly or indirectly liable or responsible for the payment of the stock or of the dividends thereon or for any matter relating thereto". It is clear from this that the British taxpayer as such is in no way liable to meet this obligation of the Rhodesian Government. This is further borne out 1120 by Section 20 of the 1877 Act, which, as originally enacted, provides that a person claiming to be interested in stock to which the Act applies or in any dividend thereon may present a Petition of Right in England and that the certificate of judgment or order of the court in proceedings upon such a Petition may be left with the registrar of the stock instead of the Treasury and shall be complied with by the registrar or other agent of the colonial government having possession in England of moneys of such government instead of by the Treasury". In the case known as Franklin v. the Attorney General, which was decided on October 27 last, the High Court ruled that the remedy by Petition of Right in England provided for in Section 20 of the 1877 Act had not been modified in respect of Southern Rhodesia Government stock by certain later legislation. It was, I think, the Cyprus Act 1960. Following this decision, Petitions of Right have been presented by various stockholders and have been referred to the High Court in pursuance of an endorsement of Her Majesty on the advice of the Attorney General. More than fifty petitions have so far been received. In relation to one of these petitions, an order was made in the High Court this morning adjudging the sums claimed to be due, although I understand that it was made quite plain in the course of the hearing that there would be no liability on the Consolidated Fund of the United Kingdom. It is expected that similar orders may well be made in the proceedings on the other petitions. As I have explained, it is clear from the terms of the Act that the United Kingdom funds are not liable to meet payments on these stocks, which is a responsibility of the colonial Government only, and that any declaratory order will fall to be satisfied out of the moneys of that Government held in England by the registrar of these stocks or any other agent of the colonial Government.
The funds held by the Bank of England as registrar in respect of the stocks are negligible. Her Majesty's Government have no detailed information as to other funds held in this country which are, or might be, available to meet the liabilities to stockholders, with one possible exception—the funds of the Reserve 1121 Bank of Rhodesia which are held in this country. It would not be appropriate to disclose the amount of these funds of the Rhodesian Bank, but it forms only a fraction of the amount of the arrears I have just quoted. Whether or not these funds of the Rhodesian Bank, or any part of them, are available to meet the liabilities in respect of the stock is a question of law and therefore, in the last resort, is a question for determination by the courts. As this is the case, it would not be appropriate for me to express any opinion on this issue. Should it emerge, by a decision of the courts, that the funds of the Reserve Bark are not available for this purpose and that, as is believed, there are no other significant funds available, the petitioners will of course be without an effective remedy in this country. Should, however, it emerge, by a decision of the courts, that all or any of the funds of the Reserve Bank or some other significant funds are available, it nevertheless seems clear that they will be quite insufficient to meet the total liabilities. If nothing further were done, the effect in law would be that the creditors would be dealt with on a "first come, first served" basis, so that the earliest would receive 100p in the pound (as I suppose I have to say now) and latecomers, who would be the immense majority, nothing. This would be manifestly unjust. In commercial law the difficulty would be met by a winding-up or a bankruptcy, yielding an equal dividend to all unsecured creditors; and that, in our view, is the only just solution here. But such a solution is not possible without legislation.
Accordingly, Her Majesty's Government have decided that, in the event of significant funds being held by the courts to be available to meet the obligations of the Southern Rhodesia Government, they will ensure that they are distributed equitably, and will entrust the Foreign Compensation Commission with this task, which may involve difficult questions of law and fact as to the rights of any particular claimant. Her Majesty's Government propose that other creditors of the Southern Rhodesia Government, including Her Majesty's Government themselves, should be given an opportunity to submit their claims to the Foreign Compensation Commission. To the extent that any amounts due to stock- 1122 holders or other creditors remain unsatisfied, the intention is that they should be preserved and be capable of being pursued against a future lawful government. Legislation in the form of an Order in Council will be required, and a draft is being prepared. Her Majesty's Government have thought it right to make this Statement now in order that stockholders may be fully aware of the position. My Lords, I apologise for the length of that Statement, but it was inevitable.

§ LORD BESWICK
My Lords, we are grateful to the noble and learned Lord for making this Statement, and if the Government propose to invite Parliament to agree to certain legislation it is certainly acceptable that we have the longest possible notice of what the intention is, apart from the convenience to the stock-holders, to which the Lord Chancellor referred. Obviously I have not had the opportunity to consider with my right honourable friends in another place their view of this Statement, but it would seem to me that the general proposition that the Consolidated Fund of the United Kingdom, the taxpayers of this country, should not be liable for the servicing of these stocks is an acceptable proposition. I should also have thought that it was right that we should try to ensure that the principle of "first come, first served" should not apply in this case.
My Lords, may I ask the noble and learned Lord one question? He said that if it is found that there are other funds available, and in particular the funds in the Reserve Bank, then they will be distributed under the proposed Order. May I ask the noble and learned Lord whether it would not be possible, by appropriate legislation, to ensure that these funds are in fact available for this purpose? In other words, is there any reason at all why we should not ensure that the maximum possible assets of the Rhodesian Government are used for this purpose?

§ LORD BYERS
My Lords, I should like to support what the noble Lord, Lord Beswick, has said; and I should like to ask the noble and learned Lord about one technical point. May I take it that no application by any creditor should be made to the Foreign Compensation Commission until a further announcement is 1123 made? Otherwise, there could be a certain amount of chaos in the immediate future.

§ THE LORD CHANCELLOR
My Lords, I am very much obliged to both noble Lords. So far as I can give them, the answers to the questions are as follows. Of course, by legislation one could make the funds of the Reserve Bank available for any purpose whatsoever, but the Reserve Bank has liabilities of its own which are not the liabilities of the Rhodesian Government. Therefore, it does not seem to me that it would be right to anticipate the decision of the courts on this matter, because somebody else would have to go without, I assume, if we did that. It is quite likely (although I do not want to express an opinion on this, for the reason I have given) that the courts will say, "No: the Reserve Bank is one thing, the Government is another; and the creditors of each are separate". If that happens, it would not be right for us to interfere with that situation by legislation which would effectively, and I think retrospectively (although I speak without notice on this), damage the rights of those who are undoubtedly entitled to the funds. Therefore, we thought it best to leave it until the courts have decided what it is that is available to meet the judgments when and if they are made.
In answer to the noble Lord, Lord Byers, I agree that there is no particular reason—and it would be inconvenient—for applicants to write into the Foreign Compensation Commission now, because nothing whatever can be done until the Order in Council is approved.

§ LORD NAPIER AND ETTRICK
My Lords, I am greatly obliged to my noble and learned friend for his courtesy in giving me notice of his intention to make this Statement this afternoon. I think your Lordships will agree that it contains a great deal of substance, and I should like to give it the careful study that it undoubtedly merits. My immediate reaction is that it sets out the position extremely fairly. May I ask my noble and learned friend on the Woolsack just one question? Can he give your Lordships the assurance, in view of the judgment given to-day in the High Court in favour of the petitioner, that there will be no 1124 question of Her Majesty's Government seeking to introduce a Bill, or an Order in Council, on the lines of the Burmah Oil case, to reverse the decision of the High Court?

§ THE LORD CHANCELLOR
My Lords, it is certainly not our intention to introduce legislation to reverse the decision of the High Court. What we are seeking to do, of course, is this. If people in this country sue to judgment a debtor who cannot pay, then somebody has to distribute the funds which are available equitably, and not on a "first come, first served" basis. Normally, that happens under the bankruptcy law or the law governing the winding-up of companies, and you do not need legislation for the purpose. But if we did nothing we would in fact be ensuring that the people who came first got everything and that those who were last in the queue got nothing. So what we are really doing, as I see it, is to substitute a statutory bankruptcy or winding-up procedure in order to distribute the assets fairly, if in fact there are any assets to distribute, which is not yet established. But we certainly do not want to take away from a petitioner of right a judgment which he is given, for what it is worth.

§ LORD BESWICK
My Lords, I do not wish to pursue this much further without proper opportunity for consideration and consultation, but again the noble and learned Lord refers to the possibility of there being assets. What I think we should like is some assurance that every effort will be made to establish what assets there are, wider than the immediate assets held by the Registrar.

§ THE LORD CHANCELLOR
My Lords, of course in all litigation the initiative lies with the claimant, and in this case it is the stockholders who will be trying to make various assets that they may get wind of liable to meet their judgment—and it will be for the court to decide whether they can. No doubt the holders of those assets will, if they think there is a doubt as to their liability to meet this particular judgment, challenge the availability of those funds to meet that particular judgment. I think we have got to leave that to the courts because, for the reason I gave to my noble friend a moment ago, I do not want to interfere with the legal position at that 1125 stage. The only reason we are interfering is to ensure that if the assets are once identified they will be distributed equitably.

§ LORD PARGITER
My Lords, may I ask the noble and learned Lord whether or not, in the event of there being funds in this country which are in the ownership of members of the illegal Government of Rhodesia, they will be attached for this purpose?

§ THE LORD CHANCELLOR
My Lords, that again would be a question for the court, and I should not like to anticipate the ruling of the court. But what the Statement referred to was funds of the lawful Rhodesian Government in this country. So far as I know, the unlawful authorities of Rhodesia have no funds in this country. If they do, they are not known to me.

§ LORD BYERS
My Lords, perhaps the services of Mr. Muir Hunter might be used in this case.

§ THE LORD CHANCELLOR
My Lords, I am sure that the learned gentleman referred to will be glad of the boost which the noble Lord has given him.