THE MIDLAND RAILWAY (PAPERS RELATIVE TO).

Appendix to the Journals of the House of Representatives, 1887 Session II, D-02

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Sess. 11.—1887. NEW ZEALAND.

THE MIDLAND RAILWAY (PAPERS RELATIVE TO).

Presented to both Houses of the General Assembly by Command of His Excellency .

SCHEDULE OE DOCUMENTS IN EEEEEENCE TO THE MIDLAND EAILWAY.

"An Act to authorise the Construction of the East and West Coast (Middle 6thNovemIsland) Eailway under ' The Eailways Construction and Land Act, 1881,' with ber > 188;i - -certain Modifications and Extensions of the said Act; also of a Eailway to connect Nelson with the said East and West Coast Eailway; and to authorise the Construction of the Putaruru and Eotorua Eailway."— New Zealand Statutes, 1884. Deed between Queen, of one part, and William Chrystal and others, of the i7th Januother part, whereby parties of second part (contractors) contracted to make East aiy ' 8 and West Coast Eailway within ten years. — First Schedule to amending Act, 1886. Memorandum and Articles of Association of " The New Zealand Midland mh April, Eailway Company (Limited) " — State object of the company to acquire the contract of the 17th January, 1885, and various other objects in connection therewith. Eegistered office of company to be in England. Liability limited. Capital, £500,000, divided into 50,000 shares of £10 each.— Not printed. Indenture whereby contract (17th January, 1885) was assigned by Chrystall Soth April, and others, with consent of Agent-General, to New Zealand Midland Eailway Company (Limited). — Printed. " An Act to amend the East and West Coast (Middle Island) and Nelson sothJuly, Eailway and Eailways Construction Act, 1884 : " — Provides for registration of company in New Zealand; but this has not been done; Authorises Queen to enter into a contract with the company to carry out original contract (17th January, 1885), with certain modifications set forth in Act (30th July, 1886,) and schedule thereto.— Neio Zealand Statutes, 1886. Draft contract prepared between the Queen and the company agreed to by 14th Decemthe Government and provisionally by the company's representatives in the cr ' colony, subject to the approval of the Board of Directors in England.— Printed. Board did not accept contract as proposed by company's representatives in May, 1887. New Zealand, but proposed alterations. Discussions between Agent-General and the company on subject, but no arrangement come to. Company get a draft contract prepared, taking as a basis the draft of the August, 1887. 14th December, 1886, and introducing the additions and omissions they desire..

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Despatch from the Agent-General informing Colonial Treasurer that the chairman of the company had intimated to the effect that they had made up their minds as to the alterations they desired in the draft contract (December, 1886), and were forwarding a new draft to their representatives in the colony. — Printed. (Enclosure.) Secretary to company to Agent-General, informing him that directors had settled form of new contract, and had given instructions to solicitor of company to send copies to him.— Printed. Despatch from Agent-General to Colonial Treasurer, in continuation of the 6th August, reporting what had since taken place in reference to the draft new contract, and commenting thereon. — Printed. (Enclosures.) Mr. McDonell to Agent-General, stating that directors proposed to send to Mr. Scott (company's agent in New Zealand) a telegram as follows : "If Cabinet approve contract', finance satisfactory, and Springfield andßelgrove lines will proceed." Suggestion that AgentGeneral might like to send a similar telegram.— Printed. Letter from Mr. Kennaway (Secretary, Agent-General's Department) to Mr. McDonell (secretary to the company), informing him that Agent-General regretted new draft sent out in present form, because it involved even greater difficulties than those which attended the amendments suggested by the company's solicitor in May.— Printed. Mr. Kennaway to Mr. McDonell, stating Agent-General not prepared to send similar telegram.— Printed. Agent-General to Colonial Treasurer, reporting farther correspondence with Midland Eailway Company, pointing out new requirements of the company ; and especially the requirement of a guarantee as to the value of the land. — Printed. (Enclosures.) Mr. McDonell to Agent-General, denying that what the company require is a guarantee, but " an honourable effort to carry out ah agreement by a simple and business-like method," and discussing various points in reference to the negotiations.— Printed. Mr. Kennaway to Mr. McDonell, avoiding controversy as to statements in his letter of the 26th August, except as to one point, viz., the " guarantee."— Printed. Secretary of company to Agent-General, stating Agent-General does not appreciate directors' letter or terms of contract prepared by them, and stating " the real point of importance." Eegretting the position taken by Agent-General, and throwing upon him alone responsibility of fresh negotiations and prolonged delay. — Printed. Memorandum by Sir Julius Vogel on giving up charge of the arrangements with the Company.

10th August, 1887.

6th August, 1887.

23rd August. 1887.

19th August 1887.

21st August, 1887,

22nd August 1887.

7th September, 1887.

26th August, 1887.

31st August, 1887.

2nd Septem ber, 1887.

7th October, 1887.

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No. 1. [Stamp.] This indenture made the thirtieth day of April, one thousand eight hundred and eighty-six, between the within-named William Chrystall, John Tucker Ford, George Hart, John Thomas Matson, Thomas Shailer Weston, John Honeycomb Cock, Charles Gates Tell, Henry Douglas Jackson, Albert Pitt, and James Sclanders (hereinafter called " the contractors"), of the first part, Sir Francis Dillon Bell, K.C.M.G., Agent-General for New Zealand, of the second part, and the New Zealand Midland Eailway Company (Limited), incorporated under the Companies Acts 1862 to 188 (hereinafter called " the company "), of the third part : Whereas the contractors have agreed to sell and the company have agreed to purchase all the contractors' rights, interests, and privileges under or by virtue of the within-written contract, and the full benefit thereof and advantage to arise therefrom, for the price of six thousand pounds, or such less sum as shall have been actually incurred as expenses in and about the obtaining the within-written contract and this assignment: And whereas Sir William Francis Drummond Jervois, the Governor of the said Colony of New Zealand, did, by an instrument in writing under his hand, dated the seventeenth day of January, one thousand eight hundred and eighty-five, duly appoint the said Sir Francis Dillon Bell, the Agent-General of the Colony of New Zealand, at any time so long as he should hold such office of Agent-General, on behalf of Her Majesty the Queen, or on behalf of the Governor of the said colony, to consent to any assignment or transfer of the within-written contract on such terms and conditions as the said Agent-General should think fit, or absolutely without any such terms and conditions : And whereas the said Sir Francis Dillon Bell is still the Agent-General of the said colony, and has agreed, in consideration of the covenants hereinafter contained on behalf of the company, to consent, in manner hereinafter appearing, to the assignment hereinafter made : Now, this indenture witnesseth that, in pursuance of the said agreement and in consideration of the premises, the said contractors, as beneficial owners, hereby assign unto the said company all that the within-written contract, and the full benefit and advantage to arise therefrom, subject, nevertheless, to the liabilities of the contractors in respect thereof, and to the conditions and agreements therein contained and on the part of the contractors to be observed and performed, to hold the same unto the said company absolutely. And the said company hereby covenants with the said contractors that they will at all times hereafter keep indemnified the said contractors and their estates or effects from the observance and performance of the conditions and agreements in the said contract contained and on the part, of the contractors to be observed and performed, and from the liabilities of the contractors in respect of the said contract, and all claims and demands on account thereof. And the said Sir Francis Dillon Bell doth, by the execution of these presents, and in virtue and pursuance of the said instrument in writing, dated the seventeenth day of January, one thousand eight hundred and eighty-five, signify the written consent of the said Sir William Francis Drummond Jervois, the Governor of the said colony, on behalf of Her Majesty the Queen, to the assignment hereinbefore contained. And the said company hereby covenants with the said Sir Francis Dillon Bell, as such Agent-General as aforesaid, on behalf of the Governor of the said colony, and as a separate covenant with Her Majesty the Queen, her heirs and successors, as follows:— 1. The company will, within fourteen days hereof, pay to the said Sir Francis Dillon Bell, as such Agent-General as aforesaid, the sum of five thousand pounds, being the amount referred to in clause 4 of the within-written contract. 2. The company will, as soon as conveniently may be, conform to the laws for the time being existing in New Zealand with reference to British companies carrying on business in that colony, so that the said company shall be domiciled in the said colony. 3. The company will, so soon as it shall have been registered in the said colony, enter into a contract in New Zealand with Her Majesty the Queen and the Governor of the said colony to carry out and be bound by all and singular the provisions of the within-written contract. 4. Such contract shall contain a covenant mutatis mutandis similar to clause 8 of the withinwritten contract, and until the said contract shall have been entered into the company will not at any time assign, charge, or dispose of their interest in the within-written contract, or any benefit or advantage thereof, either at law or in equity, without the written consent of the Governor, on behalf of Her Majesty the Queen, first had and obtained. In witness whereof the contractors and the said Sir Francis Dillon Bell have hereunto set their hands and seals, and the company have caused their common seal to be hereunto affixed the day and year first above written. William Chrystall. John Honeycomb Cock. John Tucker Ford. Charles Yates Fell. George Hart. Henry Douglas Jackson. John Thomas Matson. Albert Pitt. Thomas Shailer Weston. James Sclanders. By their Attorney, H. Alan Scott. Signed, sealed, and delivered by the above-named William Chrystall, John Tucker Ford, George Hart, John Thomas Matson, Thomas Shailer Weston, John Honeycomb Cock, Charles Yates Fell, Henry Douglas Jackson, Albert Pitt, and James Sclanders, by their attorney, Henry Alan Scott, in the presence of James Ward Burchell, 5, The Sanctuary, Westminster, Solicitor. F. D. Bell. Signed by Sir Francis Dillon Bell, in the presence of Leonard I. Maton, 21, Cannon Street, London, Solicitor.

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The Common Seal of the New Zealand Midland Eailway Company (Limited), was duly hereunto affixed in the presence of and by order of the Board. (1.5.) Thomas Salt, } Directorg (1.5.) E. Bbodib Hoaee, j llectors - 2Eneas E. McDonell, Secretary.

Eeceived this 11th day of May, 1886, the sum of five thousand pounds mentioned in clause one, of the indorsed agreement, dated 30th April, 1886.—(Signed) F. D. Bell, Agent-General.

No. 2. LNotb.—The alterations made by the Directors are shown by the additions made by them being printed in italics, and the words which they struck out being printed in erased type.] This Deed made the 14th day of December, 1887, between Her Majesty the Queen (who with her heirs and successors is and are hereinafter referred to as " the Queen "), of the one part, the New Zealand Midland Eailway Company (Limited), a joint stock company carrying on business in the City of Christchurch, in New Zealand, and elsewhere, and having its head office at No. 79, Gracechurch Street, in the City of London, in England (which, with its successors and assigns, is hereinafter referred to as " the Company "), of the other part. Wheeeas by a deed bearing date the 17th day of January, 1885, and made between the Queen, of the one part, and William Chrystall, John Tucker Ford, George Hart, John Thomas Matson, Thomas Shailer Weston, John Honeycomb Cock, Charles Yates Fell, Henry Douglas Jackson, Albert Pitt, and James Sclanders, all therein respectively described, and thereinafter collectively referred to as "the Contractors," of the other part (which said deed is hereinafter referred to as the "original contract"), the Queen and the said contractors did, in pursuance of the provisions of "The Eailways Construction and Land Act, 1881," and of "The East and West Coast (Middle Island) and Nelson Eailway and Eailways Construction Act, 1884" (hereinafter in these presents referred to as " the said Act"), and of all other powers and authorities them thereunto enabling, mutually contract and agree for the construction, maintenance, and working of a line of railway to connect the east and west coasts of the Middle Island, from Springfield, in the Provincial District of Canterbury, to Brunnerton, in the Provincial District of Westland, so as to connect at Springfield aforesaid with the New Zealand Government railway already constructed, and having its terminus there, and connecting Brunnerton aforesaid with the Town of Greymouth, and also a further line of railway from Brunnerton aforesaid to or near Belgrove, in the Provincial District of Nelson, so as to connect there with the New Zealand Government railway already constructed, and leading thence to the City of Nelson, and connecting the same with the first before-mentioned lines of railway, which two several lines of railway are thereinafter (and the same are hereinafter) referred to as " the said railway," with all necessary buildings, railway-works, and other appliances requisite for the same and for working the said railway upon the terms and conditions and with and subject to the covenants, agreements, provisos, or restrictions in the said deed now in recital contained : And wheeeas the original contract was laid before the General Assembly of New Zealand in the session thereof held in the year 1885 : And wheeeas by a deed indorsed upon the said hereinbefore in part recited deed of the 17th day of January, 1885, and made between the said contractors of the first part, Sir Francis Dillon Bell therein described of the second part, and the company of the third part, for the considerations therein mentioned, the said contractors did, as beneficial owners thereby, with the written consent of the Governor of New Zealand on behalf of the Queen, testified by the said Sir Francis Dillon Bell, who, by virtue of an instrument in writing bearing date the 17th day of January, 1885, was appointed by the Governor to give such consent, being a party to and executing the said deed now in recital, assign unto the company all that the original contract, and the full benefit and advantage to arise therefrom, upon the terms and with and subject to the covenants, provisos, and conditions therein contained : And wheeeas upon the treaty for the assignment of the original contract it was agreed that certain constructions or modifications of the terms of the original contract should be made, and for the purpose of carrying out such agreement " The East and West Coast (Middle Island) and Nelson Eailway Construction Act Amendment Act, 1886," was passed : And wheeeas the deposit of £5,000 required by the original contract to be paid by the said contractors has been paid by the company to the Agent-General of New Zealand on behalf of the Queen, and all other acts necessary for the due fulfilment of the original contract up to the date of these presents have been duly performed : And wheeeas it is expedient that the original contract should, in pursuance of " The East and West Coast (Middle Island) and Nelson Eailway Construction Act Amendment Act, 1886," be modified in the manner hereinafter appearing, and that a new and further contract should be made and entered into between the said parties hereto, embodying the terms of the original contract, with such modifications thereof as are hereinafter contained : And wheeeas the value of the lands to be granted to the company in pursuance of the provisions of the said Act and of the original contract has been calculated and determined in the manner prescribed by subsection" (3) of section 8 of the said Act, and the persons appointed by and under the said section have duly made and given their certificate in writing bearing date the day of , 188 , whereby it is shown that the total area to be granted to the company is 2,304,000 acres, and it has been agreed that the particulars of such valuation shall be set forth upon a map for the purposes and to be made available as hereinafter mentioned, without prejudice to the right of the company (if any) to obtain other Crown lands that may then be available to meet the lawful claims of the company : Now this deed witnesseth that, in consideration of the premises and of the mutual covenants

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hereinafter on the part of the Queen and of the company contained or implied, it is hereby covenanted and agreed by and between the Queen and the company as follows: — 1. The valuation of the Crown lands of which grants may be made to the company under the original contract and these presents shall be shown on a map similar to the map marked " B" attached to the original contract and referred to in the Third Schedule to " The East and West Coast (Middle Island) and Nelson Eailway and Eailways Construction Act Amendment Act, 1886," and hereinafter throughout these presents such valuation is termed and referred to as " the certified valuation," and the whole of the lands comprised in the first-mentioned map is hereinafter throughout these presents termed and referred to as " the authorised area." The map to be made under this clause shall be executed by the Queen and the company, and shall be deposited in the office of the Minister for Public Works at Wellington, and such map and valuation are hereby confirmed, and shall be binding on the Queen and the company. 2. The lands within the limits of the authorised area shall be available for the following purposes, and shall from time to time be set apart and devoted thereto accordingly as may be required: — (a.) The area of land that may be required to satisfy the lawful claims of the company under the original contract: (b.) The area required to satisfy the choice by or on behalf of the Queen of alternate blocks on the said line of railway under such contract, to be selected from time to time : (c.) Areas of land which the Queen is hereby authorised to take from time to time for the purpose of locating bond fide settlers thereon under the provisions of " The Land Act, 1885," such land to be taken in blocks of not less than five hundred acres at a rate not exceeding five thousand acres for every year during- the period the original contract and these presents are being carried out by the company, unless the company shall consent to a greater area being so taken in any one year : Provided that for all lands so taken the Queen, at the option of the company, will pay the company at the price set forth for such land in the certified valuation, such payment to be made within six calendar months after the land shall have been taken as aforesaid, or such land shall be deemed never to have been included within the authorised area, or such lands shall be deemed to have been taken by the Queen as blocks under subsection (b) hereof: Provided also that no land shall be taken for the purposes aforesaid on the line of railway which the company shall within twelve months after the completion of detailed surveys of the line of railway notify to the Governor, on behalf of the Queen, is required by it as sites for railway-stations or townships, but so that the area to be required by the company for any one such township shall not exceed six hundred and forty acres : (J.) All lands which at the date hereof are subject to any rights of private ownership, tesaHey. e*-etber-eeeupaHey, or which have, prior to the Ist day of January, 1887, been set apart, either permanently or temporarily, by or on behalf of the Queen, under any law or regulations, as reserves for any public purposes : (c.) All lands which, until the final settlement with the company, may be taken up, leased, or occupied in any manner under the laws or regulations for the time being in force relating to mining : (/.) All lands which from time to time it may be considered by or on behalf of the Queen should be reserved or set apart for mining under any law or regulations for the time being in force relating to such lands. In any provision of this contract in which reference is made to "mining" such reference, unless otherwise expressly mentioned in these presents, means mining for gold or silver upon lands of the Crown, with all rights pertaining thereto, and in such manner and with such machinery, works, or other appliances as may be authorised or required under any law or regulations for the time being in force in the colony, including the doing of all lawful acts or things incident or conducive to such mining : Provided always that no such reservation shall be made of any lands which at ihe date of such reservation are not being bona fide worked for mining : (g.) All lands which from time to time it may be considered by or on behalf of the Queen should be reserved or set apart for purposes of public recreation, or as endowments for charitable or educational purposes, under any law for the time being in force : Provided that no such reserve shall be so made unless the situation and extent thereof shall have first previously been agreed upon between the Governor in Council and tho company. Any lands which are described in the schedules to "The Westland and Nelson Coalfields Administration Act, 1877," shall not be deemed to be Crown lands for the purposes of these presents. Provided that no accurate survey of the lands required for the several purposes hereinbefore described need be made until the same may be required for immediate use or occupation under the terms of the original contract, it being intended by this covenant that, until the lands available for the company should be absolutely vested in such company, all the powers hereinbefore reserved to and exerciseable by or on behalf of the Queen may be so exercised accordingly. Provided further that it shall be optional for the company at any time to select lands coming within the meaning of clause (d) which are held under lease or license granted or issued by the Queen or by some person or authority on her behalf, subject to existing rights affecting the same, or, with the previous consent of the Queen, to select any other lands coming within the meaning of clause (d), subject to existing rights affecting the same ; and that it shall be competent for the company at any time to select any lands coming within the meaning of clause (c) or (/), but subject, as to lands coming within the meaning of clause (c), to the consent of the Queen and of the miners lawfully occupying and having an estate or interest in the same being first obtained, and, as

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to lands coming within the meaning of clause (/), to the condition that, if lands so selected shall subsequently be required and taken by the Queen for mining purposes, the company may select from the land still legally available for selection other lands equivalent in area and value to the lands so taken. 3. That, if the 2,304,000 acres of land to be selected by the company and granted by the Queen does not, on sale by the company, realise the sum of £1,250,000, the Queen will, upon the completion of the said railway, grant such additional lands as may be necessary to bring the total selling value of all the lands granted up to the said sum of £1,250,000. 4. That, subject to the provisions of clause 9 hereof, the company shall be at liberty from time to time, and when and as it in its discretion shall think fit, to select and take from any part of the authorised area still available for selection so much of the lands as it shall have earned or become entitled to in respect of any completed section or sections of the said railway, in accordance with the original contract and these presents, and the company, in exercising such selection, shall not be compelled to take any lands upon the alternate-block system unless they shall so think fit; and thereupon, as soon as the land selected shall have been surveyed as provided by the said Act, the company shall be entitled to receive a warrant from the Governor, on behalf of the Queen, directing the District Land Eegistrar of the district in which the land dealt with is situated to issue a certificate to the company, or to such person or persons as the company shall direct, in such manner and form as is authorised by law : Provided that the Queen or the Government of the colony shall not be liable to the company for any delay in making any such survey, or in the issue of any warrant or certificate as aforesaid ; but the company shall be entitled, after making any such selection under the original contract and these presents, to enter upon the land selected. And the Governor, on behalf of the Queen, or such person as he may from time to time authorise in that behalf, shall, as soon as conveniently may be, issue and give to the company, or to such person or persons as the company shall direct, such instrument or authority as may be necessary to define generally the situation and area of the land so selected and the title of the company thereto. 5. That, until the particular lands to be respectively retained or acquired by the Queen and the company shall be actually ascertained, it4s-uadersteed the Queen will not grant any leases or licenses of or otherwise alienate or deal with any of the lands within the authorised area, except for the purposes of mining under the Acts relating to mining, er-fer-pasteral-pufpesea-üßder-aHy-Aet-autlierieiag leas6s-e3=4ieeHses-fei?-suek-pu3=feees,- and except as provided in these presents, without the written consent of the company for that purpose being first had and obtained. 6. That, with all convenient speed after the date hereof, the parties hereto shall ascertain and agree upon the proportion which the estimated cost of construction, including interest during construction, and all other expenses of the company, of the several sections of the said railway as defined in or -delineated upon the map marked " A " annexed to the original contract, or such other sections as eMI-aereafte?—be-agrood-upon - botwoea—the—pafties-4ierete may from time to time be completed and opened for traffic bears towards the sum of £2,500,000, being the estimated cost of construction of the said railway so far as the same relates to the lands to be granted by the Crown to the company; and the amount of such estimated cost of construction of each respective section, when so ascertained, shall be entered against such section in the account hereinafter mentioned, so that the value of the land to be selected and taken as hereinbefore described in respect of each such respective section of the said railway shall be ascertained. Sneh value shall be equal to 50 per cent, of the estimated cost of each section of the said railway in relation to the lands to be granted by the Crown to the company as hereinbefore mentioned. 7. That the value of the land so selected and taken as aforesaid, when ascertained by reference to the certified valuation, shall be charged against the company in an account of the value of the land to which for the time being they shall be entitled, and which shall be kept with them for that purpose, at the same rate per acre as that named in the certified valuation for the block within which such piece of land is contained. 8. The cost of survey of each particular piece of land selected and taken as aforesaid shall be borne eae-aalf by the Queen ftud-tke-etlies-kftlf-by-tfie-eoHipaay. and all such surveys shall be made by or under the direction of the Surveyor-General, wliese-eertifieate-ef-tlie-eest-tlier-eef-sliall-be-feiHdißg-aad eea6l«si¥e-ea4fle-pai„es4ierete r £ffld-4ae-a»euat-e-_-sue^^ surveyed-}— er-aay-ef-ber-effieers-eatitled-te-reeeive-tfee-sameT 9. Notwithstanding anything hereinbefore contained as to the right of the company to select any land to which it may be or become entitled, no selection shall be valid until a period of two calendar months shall have elapsed after such selection has been made and notified to the Minister for Public Works by the company ; and within such period the Minister for Public Works may object to any such selection, on the ground that the land comprised therein is required for any of the purposes set forth in subsections (c), (d), (c), (/), and (g) of clause 2 hereof, in which case the selection shall be deemed not to have been made. 10. After the completion of the said railway the whole or any part of the lands which the company shall have earned or become entitled to in respect thereof, and not already selected and taken and granted to or otherwise vested in them, shall be granted to or otherwise vested in them, or as they may direct, in such manner and as and when they shall so require or direct, teut-ee-tteWke wkßfß-ef-SBek4aßdß-6aa-__-be-g?a_-.tod to^ke-eeapaay-withia^ea-yeam-lrem-tfee-lst-dfty-ef-Jaaaafyj-LSS?. 11. That, in the event of the purchase of the said railway by the Queen or on her behalf, in accordance with the Acts relating thereto, such a sum shall be included in the price to be paid for such purchase as is equal to the amount which may have been actually paid to the shareholders or debenture-holders of the company as interest during construction for the period ending 31st July, 1897, the rate not to exceed an average of 4 per cent, per annum, except in the case of shares or debentures representing £500,000 in amount of capital first raised, in regard to which

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the rate shall be 5 per cent. The total amount of such interest to be added to the price of the said railway not to exceed the sum of £400,000. 12. That the Queen shall give to the company and the company shall give to the Queen mutual running powers and terminal facilities over the respective lines of railway of the Queen and the company, on the terms that the party exercising such running powers shall pay to the party owning the line run over 60 pier cent, of the gross mileage proportion of all the receipts from all traffic carried over the owning party's line by the party exercising such running powers, and the Queen hereby agrees in particular to give the company access to the ports of Lyttelton, Nelson, and Greymouth, and to the Government termini at such ports, and at Christchurch.* 13. That the period for payment of the sum of £150,000 as provided in clause 5 of the original contract shall be and the same is hereby extended until the 31st day of December, 1888 Stat J-aly-IW. And this deed further witnesseth that, in consideration of the premises, the said company doth hereby covenant with the Queen in manner following, that is to say,— (a.) The company shall enter into and enforce the due performance of a bond fide contract or contracts for the construction of a section of the said railway, to commence at Springfield and extend towards Brunnerton, at a cost of not less than £60,000 ; and of another section of the said railway, to. commence at some point to be agreed upon on the present Government line from Nelson to Belgrove, and extend towards Eeefton, at a cost also of not less than £60,000, in addition to the contract already entered into for the section of the said railway from Brunnerton to a point on the Teremakau River, such contract or contracts to be entered into as soon as the necessary surveys can be made and tenders and the necessary capital obtained, and each to contain a provision which shall be of the essence thereof, for the continuous prosecution of the same until the due completion thereof. Provided, further, that, as respects all the said sections of the said railway hereinbefore mentioned, or any of them, or any other sections from time to time completed fit for opening, the Queen will, at the request of the company, and for such time and in such manner as may be agreed upon between the Queen and the company, work and carry on the traffic on any parts or part thereof which are or is completed and fit for traffic upon the terms that the Queen shall pay to the company 50 per cent, of the gross mileage receipts in respect of all traffic carried over the railways of the company or any portions thereof so ivorked, and. will, in addition thereto, pay to the company a rebate of 10 per cent, of the gross mileage receipts of the Queen in respect of all traffic to or from the railways of the company or any portions thereof and passing over the railways of the Queen, and the Queen will not evade this provision by any system of re-booking, but shall have through rates and fares ; and shall in all respects work, manage, equip, and maintain such portions of the company's railways as efficiently and in the same manner as if the same formed part of the raihvays of the Queen, and will, at the determination of such working, hand over the lines so ivorked in good and efficient condition to the company; and the Queen shall, upon the same conditions as to handing over [in good order, have the use of the company's rolling-stock ditring the period of such working. (b) The company shall aet-deviate-f-reaa-tke-liae-ef—railway—as-surveyed—er-alter—aay—g_=adieats-»pea tke-6aid4iae-ef-railway-ao tho same aro frem-Spriagfield-te-fettaaerteaj-depesited-in tho effaee-ef-the-Miaister— Ne. -aad-eepies-wkereef-feave-beea-liaaded-fee—tbe-ee»paay—before—tbe—eseeutiea-ef-taese preseats; witliout-tae-eeaeeat-ef-tbe-Gevefaer-first-bad-aad-ebtaißed; construct the line from Springfield to Brunnerton by the Arthur's Pass route, but shall not be bound by details of plans already made, and shall not at any time assign, change, or dispose of this contract, or any benefit or advantage thereof or thereunder, either at law or in equity, without the written consent of the Governor on behalf of the Queen first had and obtained; but this clause shall not be deemed to affect or interfere with or in anywise abridge the powers of borrowing given by the said Act. Provided that the Governor may at any time appoint any person in the colony or elsewhere for the purpose of consenting to any such assignment, and no such consent shall be arbitrarily withheld either by the Governor or by any person so appointed as aforesaid. 14. Upon the company entering into either of the contracts specified in the preceding clause to the satisfaction of the Agent-General for New Zealand for the time being, the Queen shall forthwith place, in the names of ct trustee or trustees to be agreed upon between the parties, such lands as the company may select, of ct value of not less than £30,000, as shown in the certified valuation, in respect of each such contract; and such trustee or trustees shall have power, if so requested by the company, to sell, dispose of, or charge or mortgage such lands, and to apply the proceeds thereof in or toioards the construction of the section of railway in respect of which they shall have been so placed in the names of such trustee or trustees, and for no other purpose. Provided that upon the completion of any such section any lands not already sold by the trustee or trustees shall be vested in the company, subject only to such charges or mortgages thereitpon as shall have been made by the trustee or trustees at the request of the company as aforesaid. 15. If at any time hereafter the net receipts of the company from all sources except the sale of land shall in any year be such as to allow of the payment of a dividend at the rate of £10 per cent, per annum upon their ordinary stock, after providing for debentitre interest and office expenses, the company shall apply any surplus above the sum. requisite to pay such dividend to the completion of

* N.B. —This is substituted for a clause providing that running powers should be as favourable as those granted o any other company in New Zealand.

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their railway until the ivhole is completed and opened for traffic, and thereafter in doubling and improving (by the erection of stations or otherwise) their railway until the same is made a first-class double line throughout; and thereafter one half of sttch surplus shall be expended by the company in sitch manner as they may think fit, and the other half shall be paid by them to the Queen, without any deductions. If anything herein contained shall require the assent of the New Zealand Parliament, the Queen will use her best endeavours to procure such assent before the end of the year 1890. And it is hereby declared that the said original contract of the 17th day of January, 1885, and all the covenants, agreements, provisions, terms, and conditions thereof, is hereby confirmed, save so far as the same is modified by any of the foregoing provisions. 16. And it is hereby declared and agreed that if at any time hereafter any dispute, difference, or question shall arise touching the construction, meaning, or effect of these presents, or any clause or thing herein contained, or the rights or liabilities of either of the said parties under these presents, or if the Queen and the company shall be unable to come to an agreement within the meaning of clause 6 of these presents as to the cost of any section of the said railway, to be ascertained as aforesaid, or otherwise howsoever in relation to the premises, then every such dispute, difference, or question shall be referred to the arbitration of two indifferent persons, one to be appointed by each party to the reference, or an umpire to bo appointed by the arbitrators in writing before entering on the business of the reference. And if either party shall refuse or neglect to appoint an arbitrator within eae three calendar months after the other party shall have appointed an arbitrator and shall have served a written notice upon the first-mentioned party requiring such party to make an appointment, then the arbitrator appointed as aforesaid shall, at the request of the party appointing him, proceed to hear and determine the matters in difference as if he were an arbitrator appointed by both parties for that purpose, and the award or determination which shall be made by the said arbitrators or arbitrator, or of such umpire, if the arbitrators shall disagree, shall be final and binding upon the said parties hereto respectively, so as such arbitrators or arbitrator shall make their or his award in writing within three calendar months after the reference to them or him, or on or before any later day to which the said arbitrators or arbitrator, by any writing signed by them or him, shall enlarge the time for making their or his award, and so as such umpire shall make his award or determination in writing within one calendar month next after the original or extended time appointed for making the award of the said arbitrators shall have expired, or on or before any later day to which the umpire shall, by any writing signed by him, enlarge the time for making his award. And also that no action or legal proceedings shall be commenced or prosecuted by either of the said parties hereto against the other of them touching any of the said matters in difference unless the party to be made defendant to such action or proceedings shall have refused or neglected to refer such matters to arbitration pursuant to the provisions hereinbefore contained, or unless the time limited for making such award as aforesaid shall have expired without any such award being made. And also that all necessary witnesses on behalf of either of the parties to such reference, and all persons claiming through them respectively, shall submit to be examined by the said arbitrators, arbitrator, or umpire upon oath or affirmation in relation to the matters in dispute, and shall produce before the arbitrators, arbitrator, or umpire all books, deeds, maps, papers, accounts, writings, and documents within the possession or power of the said respective parties which may be required or called for, and do all other things which, during the proceedings on the said reference, the said arbitrators, arbitrator, or umpire may require, and that the witnesses on the reference shall, if the arbitrators, arbitrator, or umpire shall think fit, be examined on oath or affirmation. And that the costs of the reference and award shall be in the discretion of the arbitrators, arbitrator, or umpire, who may direct to and by whom and in what manner the same or any part thereof shall be paid. And that the submission to reference, and any award made in pursuance thereof, may, at the instance of either of the parties to the reference, and without any notice to the other of them, be made a rule or order of the High Court of Judicature in England or of the Supreme Court of New Zealand. Provided that, if, by the terms of any award made under any such reference as aforesaid, any money shall in any manner be payable by the Queen or the Government to the company no attachment or execution, or process in the nature thereof, shall be issued by or on behalf of the company upon any rule or order of the Supreme Court as aforesaid unless and until the Governor shall, on behalf of the Queen, at as early a date as practicable, have taken all such steps as may be necessary to have such money specially appropriated by the General Assembly to satisfy the said award, and the payment of such money shall have been refused by the General Assembly. Provided also that nothing herein contained, excepting the provision of clause 11, shall be deemed to control or interfere with any provision for arbitration contained in the said Act or the principal Act therein mentioned. And, lastly, it is declared and agreed that these presents and everything herein contained shall be read and construed subject to the provisions of the said Act and the principal Act, except where the same are expressly authorised to be modified and are modified pursuant to any Act amending the said Acts or either of them. And also that, wherever in these presents it is provided that any appointment, instrument, or notice, or any other act or thing, power or authority whatsoever, may be made, executed, given, done, performed, or exercised by the Queen, or by or on behalf of the Queen, then, unless special provision to the contrary is made herein, it shall be sufficient if such appointment, instrument, or notice, or other act or thing, power or authority is made, executed, given, done, performed, or exercised by the Governor on behalf of the Queen, or by such person or persons as he may from time to time appoint for all or any of the purposes herein mentioned. In witness whereof these presents have been signed by , the Governor of the Colony of New Zealand, and the seal of the colony hath been hereunto affixed, and the common seal of the company hath been hereunto affixed, the day and year first within mentioned.

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No. 3. The Agent-Geneeal to the Hon. the Colonial Teeasueee. Sib, — 7, Westminster Chambers, London, S.W., 10th August, 1887. I received last week an intimation from the chairman of the Midland Eailway Company to the effect that they had made up their minds as to the alterations they desired in the draft contract, and were forwarding a new draft to their representatives in the colony by this mail. Being absent from London, I asked the company, if convenient to them, to favour me with a copy of their draft before sending it out; but, as you will see in their letter (copy herewith) of the 6th instant, they were anxious not to delay the communication they were making to their agents, and the new draft contract will therefore go by this mail, without my having had an opportunity of reporting to you on the proposed alterations. Meanwhile, I received your cablegram of the 6th instant, inquiring what was the position of affairs, and I replied to the effect that the company had framed a new contract so as to suit the views of the capitalists who they expected would provide the money, and that this new draft was being forwarded to the colony by this mail. I herewith enclose a copy which Messrs. Burchell, the company's solicitors, have supplied. I have this day received your second cablegram, stating that Mr. Scott has been informed by the company that the contract has been settled, and instructing me to report. With reference to the communication which has been received by Mr. Scott, you will see by what I have already written that the company, in stating that the contract had been settled, merely intended him to understand that such settlement applied only to the views of the company themselves and their financial friends. Now that I have received a copy of the new draft I will take the earliest opportunity of examining it and reporting to you in respect to the alterations to which the company wish the Government to agree. I have, &c, The Hon. the Colonial Treasurer, Wellington. F. D. Bell.

Enclosure. The Secretary, New Zealand Midland Eailway Company (Limited), to the Agent-General for New Zealand. Sic,— 79, Gracechurch Street, London, E.C., 6th August, 1887. I am instructed by my directors to inform you that they have to-day settled the form of the new contract, and have given instructions to the solicitor of the company to send you some copies. Copies are also about to be sent to the representatives of the company in New Zealand, one of which, in order to save time, will bear the company's official seal. My directors are very sorry not to have had the advantage of personal consultation with yourself during the final revise of the contract. As you are well aware, they have been compelled to frame it in such a manner as to suit the views of financial friends who have practically undertaken to supply the balance of the authorised share-capital of the company, viz., £250,000, and such an amount of debentures as may be necessary. The necessity of seizing this opportunity without delay, after the protracted and difficult negotiations, will be sufficiently obvious, as time is really very pressing. My directors have, while keeping these important points in view, endeavoured to carry out your wishes, as well as those of the New Zealand Government. Indeed, there is not much in the contract which has not been already discussed by you, and in many cases approved or suggested by yourself. In other words, in accordance with your telegram long ago, my directors have accepted the contract in spirit, subject to necessary alterations in detail. I have, &c, iBNEAs E. McDonell, Sir F. Dillon Bell, K.C.M.G., Agent-General for New Zealand. Secretary.

. No. 4. The Agent-General to the Hon. the Colonial Treasurer. Sir, — 7, Westminster Chambers, London, S.W., 23rd August, 1887. In continuation of my letter of the 10th instant, No. 1229, I beg to acquaint you with what has taken place since then in reference to the new draft contract proposed by the Midland Eailway Company. For convenience of reference I propose to designate that draft as the " August draft; " the contract settled by the Government in concert with Mr. Brodie Hoare as the " December draft; " and the amendments proposed therein by the company last May as the " May amendments." Upon carefully examining the August draft I find that it substantially repeats the May amendments; but there are some entirely new provisions, of which the following seem the most important:— (1.) A recital is inserted in the preamble, declaring that the land to be granted to the company is to be 2,304,000 acres : (2.) The condition in the December draft for dividing the cost of survey, is struck out, and that cost is to be borne entirely by the colony : (3.) The time for allowing interest on construction is to be extended to 1897 : (4.) The condition in the December draft that £150,000 should be spent on the BrunnerTeremakau Section is struck out, and the construction of it at all is made contingent on the necessary capital being obtained : 2—D. 2.

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(5.) The restriction in the December draft against deviating from the surveyed line is struck out, and, while the line is still to go by Arthur's Pass, the existing surveys are not to be binding: (6.) It is assumed that a contract containing the May amendments and the new alterations can be entered into without fresh legislation ; but, if any be necessary, then it is to be obtained before the end of 1890. It is obvious, therefore, that the whole character of the original contract of 1885, as well as of the arrangement between the company and myself last year, is fundamentally changed; and of course such a contract as is now proposed by the company is impossible without an entirely new Act. I carefully considered whether I should telegraph to you the nature of the new provisions in the August draft; but it seemed to me that the central point in the whole matter was the same as in the May amendments—namely, a demand for a guarantee of the value of the land, which was a condition I did not believe the Government would agree to ; and on hearing from you that such a guarantee was declined I informed the company to that effect. In the meanwhile, however, Mr. Avigdor, one of the contractors for the section now being built, had returned from the colony, and had informed the directors of a scheme which he had submitted to yourself and the Minister for Public Works. I therefore asked the company whether they and their financial friends would be prepared to entertain that scheme in substitution for the May amendments and the new provisions in the August draft. lam in communication with the directors on the matter, and shall soon be able to inform you of the result; but I may say at once that I do not think there is any prospect of their entertaining the scheme, as they have been so long in negotiation with financiers on the basis of the land-value being guaranteed. I had hoped that on receiving the May amendments you would have been able to send me a telegram intimating the decision of the Government as to guaranteeing the value of the land, because in that case financial negotiations on the basis of the guarantee would have been immediately stopped. It will be much more difficult now for the company to induce their friends to entertain any new proposals. The directors would have sent out a cablegram to their agents saying that, if the August draft was accepted, their finance was arranged, and the Belgrove and Springfield sections would be commenced, but such a message would of course be futile now. Copies of the correspondence that has passed are annexed. I have, &c, The Hon. the Colonial Treasurer, Wellington. F. D. Bell.

Enclosure 1 in No. 4. The Secretary, New Zealand Midland Eailway Company (Limited), to the Agent-Geneeal. The New Zealand Midland Eailway Company (Limited), Dear Sir,— 77, Gracechurch Street, E.C., 19th August, 1887. I am instructed by my directors to inform you that they propose to send the following telegram to Mr. Scott, if you see no objection to it. They think you might like to send a similar telegram to the New Zealand Government, so that they should not learn its contents only from Mr. Scott: "If Cabinet approve contract, finance satisfactory, and Springfield and Belgrove lines will proceed." My directors conclude that you have to a great extent informed the New Zealand Government of the terms of the contract as now sent out. I have, &c, JEneas E. McDonell, The Agent-General for New Zealand. Secretary.

Enclosure 2 in No. 4. The Secretary, Agent-General's Department, to the Secretary, New Zealand Midland Eailway Company (Limited). Sir,— 7, Westminster Chambers, S.W., 21st August, 1887. I am now directed by the Agent-General to acknowledge the receipt of your letter of the 6th instant, informing him that your directors had that day settled the form of contract they wished to substitute for the one drawn up by the New Zealand Government last December, and that the same was being sent out by the San Francisco mail to the company's representative in the colony. He would have replied to your letter sooner, but was desirous of first communicating with the Government on the subject. The Agent-General could not but regret that it should have been deemed necessary to send out the new draft in its present shape, because it involved even greater difficulties than those which attended the amendments suggested by the company's solicitors last May. In all the communications which took place between your chairman and himself the essential point always kept in view by both was, that whatever amendments were wanted in the December draft should be made within the lines of the existing legislation. It was obvious that there was no legal power in the Government, without a fresh Act, to enter into a contract containing the amendments proposed by the company in May, and notably the one for guaranteeing the value of the land. Moreover, no one could imagine that, even if an application were made to the New Zealand Parliament for power to give such a guarantee, the Legislature would hand over the land to the company to dispose of at its pleasure, while the colony was to be responsible to the company for the land realising a given sum. It was abundantly clear that, in any such case, the colony must retain an absolute control over the

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time, manner, and price at which the land should be disposed of, a condition which would reduce to an absurdity the elaborate provisions that had been made for valuation of the blocks to be selected by the company. For this and other reasons which the Agent-General endeavoured over and over again to explain to your chairman he could not, last May, encourage your directors to hope that the amendment containing the guarantee would be accepted, and it is now his duty to state that the Government must decline to entertain it. Your directors are aware that before Mr. Avigdor left the colony he had suggested another plan to the Ministers, and the Agent-General presumes that this plan has now been explained to the company by that gentleman. He would be much obliged, therefore, if you could inform him whether your directors would be prepared to enter into an arrangement based upon Mr. Avigdor's proposals, as in that case he would be glad to confer with them thereon immediately on his return to London. I have, &c, Walter Kennaway, Secretary, Agent-General's Department. The Secretary, New Zealand Midland Eailway Company (Limited).

Enclosure 3 in No. 4. The Seceetaey, Agent-General's Department, to the Seceetaey, New Zealand Midland Eailway Company (Limited). Sir, — 7, Westminster Chambers, S.W., 22nd August, 1887. I am directed by the Agent-General to acknowledge the receipt of your further letter of the 19th instant, stating that your directors propose to send a telegram (as quoted in your letter) to Mr. Scott, and suggesting that a similar one might be sent by the Agent-General to the New Zealand Government. At the time that letter was written your directors were not aware of the New Zealand Government having declined to entertain the amendment in the contract proposed by the company containing a guarantee of the value of the land. That decision having now been made known to you, by my letter of yesterday's date, it] will be for the directors to judge whether it would be expedient to send the telegram to Mr. Scott. The Agent-General would not himself be prepared to send a similar message to the Government, as he does not feel any doubt of their decision against the proposed guarantee being final. I have, &c, Waltee Kennaway, Secretary, Agent-General's Department. The Secretary, New Zealand Midland Eailway Company (Limited).

No. 5. The Agent-General to the Hon. the Colonial Treasures. Sic, — 7, Westminster Chambers, London, S.W., 7th September, 1887. Since writing to you on the 23rd ultimo—No. 1264—1 have had a further correspondence with the Midland Eailway Company, copy of which is enclosed. The tone of the company's letter of the 26th August is open to serious objection on many grounds, especially as it seems to indicate an intention to impugn the good faith of the colony. They take up, in fact, the altogether new ground that the clause guaranteeing the value of the land " does nothing more than express, in simple and intelligible language, the terms of the original contract and the understanding on which all the negotiations had been carried on from the first." They complain that the rejection of the clause is a refusal to accept the expression of this understanding in definite language. And, in order that there should be no mistake about their meaning, they contend that if the land, on applying the test of actual sale, turns out to be worth only ss. an acre, the only possible solution is to give them more. Nevertheless, they deny that the clause is a guarantee, or that any legislation as to value will ever be required at all. It did not seem to me necessary to interpret this line of argument as conveying an imputation such as would require immediate exposure. I preferred to recal the company, in very quiet language, to their true position, and to point out the inexpediency of asking Parliament to do what the company themselves say will never be wanted. To this they have now replied that their argument is not rightly appreciated ; but they repeat that the clause is not a guarantee, and end by throwing upon me the responsibility of initiating any fresh proposals. As to Mr. Avigdor's scheme, I need not refer to it any more, as it has been rejected by the company. I am bound to say that I look upon the new phase into which the business has so unexpectedly entered as being very grave. The company's position is certainly a serious one, and they-may not be able to help themselves. My letters to you for a long time past have only been a chronicle of one failure after another in their financial negotiations, and I am very doubtful whether, after such a series of failures, they will now be able to get money at all without the guarantee. I hardly think, indeed, that they would have sent in such letters as they have now clone if they had seen any prospect of getting money on other terms; and they may even find they cannot go back to the plan of creating a land-trust, To the financiers with whom they have been dealing the demand for a guarantee seems a very simple matter. " The colony," they say, " has promised to give land worth a million and a quarter; what objection can there be to an engagement to make that promise good to us if the land will not sell for the money ? " And, having apparently made up their minds not to find the money without the guarantee, their interest will now be to throw such difficulties in the way of any dealings with new people that the company may be brought to a dead-lock.

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At any rate, let me assure you that the time has come when the Government and Parliament should make up their minds as to the limit they will go to in the way of concession. Ido not think I can usefully attempt any fresh negotiations myself until I know exactly which of the May amendments are accepted, and which of them, besides the guarantee, are rejected ; but, at all events, I am quite sure that nothing whatever is now possible to the company if the land is not allowed to be made immediately available as a security. I have therefore felt obliged to send you, in the last few days, two telegrams, in which I have endeavoured to make the position clear within reasonable telegraphic limits ; and I shall await your reply with all the more anxiety on account of the extreme reluctance I have long had (as both the company and the Government are aware) to being charged with any new responsibility in negotiation. Yet I fear there is no escaping from it now. The Government have drafted a contract which the company will not execute; the company have drafted one which the Government cannot adopt; and we might go on for ever bandying amendments to and fro, were it not that the company are in imminent danger of breaking down altogether, unless there is some power to settle, here in London, the concessions that may turn out to be absolutely necessary for getting any more money to go on with the line. I have, &c, The Hon. the Colonial Treasurer, Wellington. F. D. Bell.

Enclosure 1 in No. 5. The Seceetaey, New Zealand Midland Eailway Company (Limited), to the Agent-Geneeal. The New Zealand Midland Eailway Company (Limited), Sir,— 79, Gracechurch Street, E.C., 26th August, 1887. My directors are duly in receipt of your letter, dated the 21st August, 1887, with reference to the new contract that has been sent out to their representatives in New Zealand. My directors would, in the first place, observe that they consider the New Zealand Midland Eailway to be a national undertaking, and therefore of more importance than an ordinary commercial affair. They have undertaken the work in this spirit, and in this spirit they intend to carry it through. It is therefore with much regret and disappointment that they note the summary dismissal of a scheme which was produced in perfectly good, faith, which was fair, clear, and businesslike, which was based on the expressed views of the New Zealand Government, and which, as they are confidently informed, would have led to such financial arrangements as would insure the rapid construction of the railway. My directors think that such a document was at least worthy of fair consideration, and of friendly consultation in order to remove doubts and difficulties. They are the more impressed with this view inasmuch as your letter speaks of a " guarantee." If you will refer again to the document itself you will find no mention of a " guarantee," and they have no wish to ask for it. My directors presume that the clause to which you object is clause 3 of the new contract. They have to observe, upon that clause, that it does nothing more than express, in simple and intelligible language, the terms of the contract and of the understanding upon which all the negotiations with respect to the building of the railway have been carried on from the first. The distinct refusal to accept the expression of this understanding in definite language (which is necessary, in order that investors may know upon what basis they advance their money) must, to say the least of it, have a most unpleasant effect. The intention of the New Zealand Government, as proposed in the earliest stages of the negotiations, was that land to the value of £1,250,000 (taken at the value of the land before the building of the railway) should be given to the company as the railway progressed. Complete surveys of the country were, however, found to be absolutely wanting, and many opinions have been expressed by the inhabitants of New Zealand with regard to the value of the land, some persons going so far as to say that the land is perfectly valueless (see Sir E. Stout's speech). In this opinion my directors do not concur. Subsequently, in order to save expense and trouble, a valuation of the area within which the company has the option of selecting lands was made by the Surveyor-General and accepted by the company, under which the company will receive about 2,304,000 acres, to represent their £1,250,000 in value. A larger number of acres had been suggested, but the company, wishing to raise no obstacle to agreement, accepted the figure fixed by the Surveyor-General, and his rough valuation of the respective blocks. It is impossible to ascertain with certainty the actual value of this land, and my directors are totally unable to conceive any valid objection to the proposed arrangement—■ namely, that, if it is found that the 2,304,000 acres do not produce the minimum sum agreed upon, more land should be given. This is not a guarantee on the part of the New Zealand Government. It is nothing more or less than an honourable effort to carry out an agreement by a simple and businesslike method. My directors have referred to the rough preliminary notes of some consultations which took place with yourself in December, 1886. These notes were intended to form the basis of a formal agreement, with the view of raising debentures on security of land. The negotiation was brought to a close by the arrival of Contract No. 2 from New Zealand. The proposal would probably have taken the form of a trust. The three first clauses of the memorandum ran as follows:— (I.)' New Zealand Government to advance at once 1,000,000 acres out of 2,500,000 acres. (2.) This land to be of a present saleable value of £500,000. (3.) Company not to sell land at a price less than 10s. per acre. It is sufficiently obvious that the saleable value could only be ascertained by an actual sale, and that, if on ordinary, not forced, sales, against which No. 3 clause provides, the land turned out to be worth only ss. per acre, the only possible solution would be the granting of more land or of better land. To this practical idea my directors have naturally reverted.

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Two objections are further raised in your letter. The first, that parliamentary action will bo necessary. Even if at any time parliamentary action is required, it is not necessary that such action should be taken for years to come; and my directors have so provided in the contract. You were aware that this provision would be inserted in the contract, and, as they understood, with your approval. My directors are decidedly of opinion that legislation in respect of the value of the land will never be necessary at all. The next objection raised is one which my directors are totally unable to follow. It appears to be, that the company would sacrifice the land in order to arrive at the minimum sum that can be accepted, and that in consequence of this transaction no valuation and no measurements will be necessary. This proposition involves so many absurdities that it is difficult to deal -with it. It is manifestly the interest of the company to sell the land at the best price possible, after the value of the land has been increased by the existence of the railway. So much is this the case that my directors would have thought that even suspicion itself, on the part of the most suspicious nature, could hardly enter here. All difficulty, however, on this head (if any should still exist in the mind of any reasonable person) would be removed by a very simple agreement, under which no land should be sold at an average price of less than 10s. per acre, except by public auction or with the consent of the SurveyorGeneral. Valuations, measurements, and other arrangements with regard to the transfer of land will be necessary in any case, and that point need not be further pursued. These observations answer the greater part of your letter; and my directors can only repeat their great regret at the grave mistake which appears to them to have been made by the stern refusal of a scheme which has been arrived at, after infinite pains and trouble, in order to secure the funds necessary for the building of the Midland Eailway, and the development of the land in New Zealand, without any cost to the colony. Your letter further goes on to speak of Mr. Avigdor. My directors have had the advantage of a long communication with Mr. Avigdor, who, coming fresh from an interview with Sir Julius Vogel, has given the directors, so far as he was able, the views of the New Zealand Government with respect to the new contract. My directors have before them some notes made by Mr. Avigdor after his arrival in England upon this subject, and also the letter of yourself as Agent-General. These notes of Mr. Avigdor are useful to my directors. They note with satisfaction that there is a considerable difference between the opinions expressed by Mr. Avigdor—recently arrived from New Zealand, and bringing with him the mind of the Government —and the views expressed by yourself as the telegraphic opinions of the Government. They trust that out of this divergence of expression some solution of the present uncertainty may arise. My directors are somewhat puzzled to know whether, under existing circumstances, Mr. Avigdor or the Agent-General is now, in this respect, the more accurately informed as to the views of the Government. They have seen a memorandum containing some rough suggestions, initialled by Sir J. Vogel; but these are in such a shape that it is impossible to deal with them for business transactions. Mr. Avigdor, very properly, in conversation, urged the directors to accept the proposals that he brought, on the ground that they contained conditions more advantageous to the company than those contained in the new contract. To this my directors have to reply that they do not wish for more from the New Zealand Government than is sufficient to enable them to raise money for building the railway and to offer a fair commercial remuneration to the shareholders. With these views, they are reluctant to re-open a difficult question in order to gain more advantages, when sufficient to insure the construction of the railway has already been done in the contract now sent to New Zealand ; but they will be ready to consider, in the most friendly spirit, any proposals that you may make. The company's interests and wishes and those of the Government are in truth identical. My directors have also to observe that the hasty reply and refusal on your part has come before the new contract can have possibly reached the Government in New Zealand, and without any opportunity having been given for explanation and consultation. They still hope that, after the contract has reached New Zealand, the Government will see that it is one which they may reasonably and properly accept, and thereby secure the immediate expenditure of a large amount of English capital in the colony, together with the commencement of works at various points, as desired by the people of New Zealand. I have, &c, JEneas E. McDonell, The Agent-General for New Zealand. Secretary.

Enclosure 2 in No. 5. The Seceetaey, Agent-General's Department, to the Seceetaey, New Zealand Midland Eailway Company (Limited). Sib, — 7, Westminster Chambers, S.W., 31st August, 1887. The Agent-General has given careful consideration to your letter of the 26th instant. He does not think that any good purpose would be served by a controversy upon many statements in that letter, to which, nevertheless, exception could justly be taken by the New Zealand Government. He prefers to confine himself to the one point which, in his opinion, is of real importance. The argument advanced by your directors is concisely expressed in the statement that, if the land selected by the company should turn out upon actual sale to be worth only ss. per acre, the only possible solution would be the granting of more or better land. But this is to abrogate one of the fundamental conditions of the existing contract between the Government and the company, that none of the land shall be deemed to be of a less value than 10s. per acre. And nothing is more

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certain than that even the idea of abrogating this fundamental condition was never broached until last May, when your directors asked for the concession which is now embodied in clause 3 of their new draft contract. Your directors, it is true, express a decided opinion that the clause is not in the nature of a guarantee, and that no legislation to give it effect will ever be necessary. But that does not get rid of the difficulty that under the existing legislation the Government have no power to insert such a clause in the contract; nor would the difficulty be obviated by the proviso you suggest, that land should not be sold without their consent, because there is equally no power to give that consent if it were asked. It is difficult to see the necessity of going to the Legislature now for power to provide against a contingency which your directors themselves do not believe will ever happen. Under the draft contract settled at Wellington last December in concert with Mr. Brodie Hoare the value of the land to be taken in respect of any section of the railway was to bear a definite relation to the estimated cost of constructing that section—in other words, land, to a value agre d upon between the Government and the company, was to be apportioned beforehand to each section of the line. It is of course impossible for any one to know whether the aggregate of all the apportionments will bear the test of actual sale. But that is not a question which can arise for years to come, and surely it will be time to appeal to Parliament for redress if ever the test fails. On the other hand, it has been clearly shown, during the prolonged financial negotiations in which your directors have been engaged, that the right of selection as now expressed in the contract is not considered here an adequate security for money; and there is accordingly a pressing need for a security to be capable of being created which will be acceptable to lenders. The AgentGeneral therefore hopes that your directors may be willing to revert to the plan which was in contemplation up to last May, for placing a sufficient area of land in trust for that purpose. If such a course is still open, he will gladly do everything in his power to carry it out. It does not appear necessary to advert further now to Mr. Avigdor's proposals, as your directors find themselves unable to deal with them for business transactions. I have, &c, Waltee Kennaway, Secretary, Agent-General's Department. The Secretary, New Zealand Midland Eailway Company (Limited).

Enclosure 3 in No. 5. The Seceetaey, New Zealand Midland Eailway Company (Limited), to the Agent-Geneeal. The New Zealand Midland Eailway Company (Limited), Deae Sic, — 79, Gracechurch Street, E.C., 2nd September, 1887. My directors are in receipt of your letter dated the 31st August. The Agent-General does not appear to appreciate clearly the line of argument contained in the letter of my directors, or the terms of the contract prepared by them; but they do not dwell upon these points, since they are most anxious not to pass the limits of a most friendly discussion. The real point of importance is this. The company's solicitor, after infinite pains and care, has obtained an assurance of the necessary funds for building the railway. This assurance is given on certain conditions, and will not remain open. These conditions are very favourable to the people of New Zealand, and do not involve the Government guarantee, which the New Zealand Government have been anxious to avoid. My directors have always been given to understand that such a state of affairs would be cordially accepted by the New Zealand Government. They therefore deeply regret the position that is taken by the Agent-General; and, after having done all in their power to meet the views and interests of the New Zealand Government, must now throw upon him alone the responsibility of fresh negotiations, and, consequently, of prolonged delay and increased expenditure in the execution of a national and much-desired undertaking. I have, &c, JEneas E. McDonell, The Agent-General for New Zealand. Secretary.

No. 6. Memoeandum on the Midland Eailway. To MY SUCCESSOE. The charge of the arrangement with the Midland Eailway Company has been in the hands of Mr. Eichardson and myself. After the Act was passed in 1886 a new contract was framed, with the approval of the local Board of the Midland Company, but subject to the ratification of the Home Board. The Home Board was not able to ratify it, because, as they represented, and the Agent-General confirmed, they could not, under its terms, obtain the necessary capital. The Board is composed of high-charactered influential men. The enterprise could not be in better hands, and there is no reason to doubt that they wish to proceed with the railway, and will be content with any equitable arrangement that will enable them to obtain the necessary capital. Negotiations have been continuously proceeding during many months. The Agent-General has acted for the Government on the basis of endeavouring to arrange within the four corners of the powers given by the Legislature.

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In May last the Board sent out the alterations they desired to see made in the contract. In July one of the contractors with the Midland Eailway saw Mr. Eichardson and me and suggested modifications less onerous than those proposed by the Board, which he thought might prove acceptable. Mr. Eichardson and I so far approved of them as to say that, if the London Board were willing to adopt them, we would submit them to Cabinet with the view of the Cabinet considering whether it would recommend them to Parliament. This matter has ceased to have importance, as the Home Board did not adopt Mr. Avigdor's suggestions. In August the Board amended and modified the alterations for which they had previously asked. They urged acceptance by cable, but it was impossible, of course, to give such acceptance in the absence of the specific text of the alterations. The alterations proposed reached Wellington on the 19th September. It was impossible to submit them to the Government before the elections took place, and after the elections, obviously, the Government could not deal with them, and therefore Mr. Eichardson and myself did not submit them for consideration. The matter, therefore, must be left to our successors. In referring to it I wish to express the opinion (and Mr. Eichardson concurs) that there should be no difficulty now in putting the last proposals of the company into a shape that will be satisfactory alike to the colony and to the company. 7th October, 1887. Julius Vogel. [Approximate Cost of Paper.— Preparation, nil; printing (1,450 copies), £10 4s,]

By Authority: George Didsbuey, Government Printer, Wellington.—lBB7.