Opinion Number. 1115

Subject

ENEMY PROPERTY EXPROPRIATED PROPERTY IN NEW GUINEA: POSITION OF INTEREST PAYMENTS, PROFITS AND LIABILITIES

Key Legislation

TREATY OF PEACE BETWEEN THE ALLIED AND ASSOCIATED POWERS AND GERMANY (1919), Art. 296

Date
Client
The Secretary, Prime Minister's Department

The Secretary, Prime Minister's Department, has submitted the following memorandum for advice:

In connection with the audit of the transactions of the expropriated companies etc. in the Territory of New Guinea, I shall be glad to have authoritative decision in the following cases:

  1. A, an ex-enemy subject, had on 10 January 1920 £8,000 on deposit with the Commonwealth Bank, Rabaul at 3%. He was prescribed and expropriated on 1 September 1920.
  2. Who is entitled to the interest earned by the deposit from 10 January 1920 to 31 August 1920, the ex-enemy subject or the Custodian of Expropriated Properties?

  3. B, an ex-enemy subject, had a plantation on 10 January 1920. He was prescribed and expropriated on 1 September 1920. During the period from 10 January 1920 to 31 August 1920, he incurred a liability for goods and cash for the maintenance of himself and the upkeep of the plantation, amounting to £20,000.
    1. Who is liable, the ex-enemy subject or the Custodian?
    2. If the Custodian, should the asset have been subjected to the charge without the Custodian's approval?
    3. Who is entitled to the profits or who should bear the loss on the plantation for the period 10 January 1920 to 31 August 1920?
  4. It was the invariable practice of the expropriated companies before expropriation, to honour 'chits' for their customers. For instance, Schultze had a current account with Hernsheim & Co., Rabaul, Schultze ordered goods from Burns Philp & Company Ltd, and gave the latter Company authority to charge the cost of the goods to his account with Hernsheim & Co. The latter Company accepted the debit and passed it to Schultze's account. Hernsheim & Co. and Schultze are both prescribed and expropriated. No notice of the discontinuance of this practice has been published by the Expropriation Board. Chits have come to hand since expropriation on account of prescribed persons and for dates prior to expropriation.
    1. Is the Expropriation Board bound to honour such chits?
    2. If so, is there any limitation imposed or preference given with respect to the nationality of the creditor, such as Australian, British, or subject of any other Allied and Associated Power?
    3. Should all such chits if they must be honoured by the Expropriation Board be passed to the Clearing House for the Territory of New Guinea if the creditor resides in Australia or anywhere outside of the Territory of New Guinea?
    4. If so, where is the Clearing House for the Territory of New Guinea?
  5. C, an ex-enemy subject, was prescribed and his assets expropriated on 23 March 1921. Under his contract with a company since expropriated, he was entitled to a passage to Germany at the company's expense, on the completion of his contract. C asks for a statement of his assets as at 10 January 1920.

Can the Expropriation Board legally charge the expropriated company's local assets as at 10 January 1920 with the cost of C's passage to Germany and credit the latter's assets with the amount involved?

(2) I shall be glad to have these decisions as early as possible in order to facilitate my audit.

In my opinion the questions asked should be answered as follows:

  1. The Custodian of Expropriated Property.
  2. The Custodian is entitled to any profits earned by an estate since 10 January 1920. The liability incurred by the ex-enemy subject is not one which should be assumed by the Custodian unless arising out of action sanctioned by him.
  3. This is answered by (2). The Custodian is not bound to meet obligations incurred by prescribed persons prior to prescription. The debts in the cases mentioned are due to Burns Philp & Co. They are not covered by Article 296 and consequently cannot be adjusted through the Clearing Office.
  4. The cost of C's passage to Germany is not a proper charge against expropriated property.

[Vol.17, p. 487]