To the ¥ditor of the "Nonmi-Cinxa Datty News"
Sm—Just about a year ago what} known as "The Silver Clause" was very much in the public mind, and some even doubled ils validity and application. There is, of course, no question that the Chinese Government is entitled, by legislation, to enact that such clause shall not be enforceable in the Chinese Courts, but the views of certain persons went much further, and they contended that the foreign Courts in China would also be bound to recognise such legislation.
The question was to some ox lent ventilated at a Meeting of Debenture holders of The Central Properties Lid, when Mr. G. H. Wright, as one of the Trustees of The Shanghai Munielpat Council Superannuation Fund, and others urged that the Company should pay due regard to the rights of Debenture holders by discharging interest payments in the manner promised in the silver clause.
The recent meeting of The Central Properties Ltd. has brought the question to my mind again, the more 80 as have read a very interesting Judgment of the Court of Appeal in England where the question, in dispute was the effect of a "gold Two columns of the London Times of the 3rd November are devoted to the report of this case. An abridged report was published in your issue of the Ist December, but it ts virtually Impossible to condense to a quarter of Its Tength an account (which is Hiself a condensation by a highly qualified reporter of a much lengthier Judgment) without omitting some important aspects of: the matter.
In addition. as mentioned in your report of the case, 10 emphasis Ing the importance to the commercial community of untformity in the construction by the Courts of clauses of this nature, the Master of the Rolls stated "The reference to the gold dollar was not Intended to define a mode of payment, but to fix a measure of value. To quote the language of the Supreme Court of the United States in Norman Baltimore and Ohio Railway Ca. "Fairly construed, these clauses were intended to afford a definite standard for measure of value and. thus prelect against a depreciation of the currency and against the discharge of the obligation by a payment of lesser value than Unut prescribed." The judgment also states that the same. principles applied mutatis. mutandis to the payment of interest '5 te eaplial.
This—which clearly represents the view of both the American and English Courts—1 suggest puts the matter Ina nutshell, and Ix the proper constriction of such clauses whether they be gold or silver, at any rate as they have been incorporated in debentures, bonds, or mortgages Shanghai, It follows that the line of argument by Ar. Wright and others in connection with The Central Properties Lid. is correct, ie, that the situation which had arisen was exactly that which the clause was designed 10 meet, and that the provisions of the clause were sound and enforceable in law.
'This to me does not admit of any argument since the object of the silver clause was to ensure the amount of the liability, and was inserted solely for the purpose of protecting the creditors against loss caused through currency' depreciation, w possibility which was envisaged as soon as the use of the tact was discontinued. Valuable consideration is given by the creditor in return for the silver clause, as it muy bbe safely assumed that the borrower would not assume such a liability unless he felt certain that, in the absence of the clause, the lender would either decline 10 advance the money or would require to be compensated against the increased risk either by a higher rate of Interest or a lower capital rate of issue. If, when the very condition occurs agairist which the silver clause is direc ted, the clause Is held to be of no effect, then it would cease to be of any contractual value.
It is true that, as the decision of the Court of Appeal is against the Treasury, it is fairly certain that the latter will carry the case to the House of Lords. Nevertheless the unanimous decision of a Court composed of Lord Wright, Lord Justice Slesser and Lord Justice Romer car ries very great weight.
Shanghai, Dec. 14.
Cominent on front pose.
Text read from the printed page and cleaned; old type leaves the occasional error.