Rhodesian Government Stock (Hansard, 19 April 1973)

§ Lord Balniel

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 UDI the Government of Southern Rhodesia made a number of issues of stock in London. These issues 186W are registered under the Colonial Stock Acts and the provisions of those Acts apply to them. The Bank of England is the registrar of the stock apart from one issue for which Barclays International Bank is the registrar.

Following UDI, 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 moneys for stock held by persons who are not resident in the United Kingdom. The total amount of arrears now outstanding on these stocks is £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 funds 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 of any matter relating thereto ".

Section 20 of the 1877 Act, as originally enacted, provides that a person claiming to be interested in stock to which the Act applies or in any dividend thereon may present a petition of right in England and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 Franklin v. the Attorney-General, decided on 27th October 1972, 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 Rhodesian Government stock by certain later legislation. 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 50 petitions have so far been received. In relation to one of these petitions, an order was made in the High Court on 18th April 1973 adjudging the sums claimed to be due, although I understand that it was made quite plain in the course of 187W 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 seems 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 Bank of Rhodesia held in this country. It would not be appropriate to disclose the amount of these funds, but it falls very substantially short of the arrears already quoted. Whether or not these funds or any part of them are available to meet the liabilities in respect of the stock is a question of law in the last resort for determination by the courts. As this is the case it would not be appropriate for me to express an opinion on this issue. Should it emerge that the funds of the Reserve Bank 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 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 creditors would be served on a first come, first served basis, so that the earliest would receive l00p in the pound and latecomers (who would be the immense majority) nothing. This would be a manifestly unjust situation. In commercial law this would be met by a liquidation or bankruptcy yielding an equal dividend to all unsecured creditors, and that, in our view, is the only just solution here. Such a solution is not possible without legislation.

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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 person. Her Majesty's Government propose that other creditors of the Southern Rhodesia Government, in cluding Her Majesty's Government themselves, should be given an opportunity of submitting their claims to the Foreign Compensation Commission. To the extent that any amounts due to stockholders 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.