A.—No. la.

18

DESPATCHES FROM THE SECRETARY OF STATE

manner authorized to raise the sum of £500,000 for public works in the Province, with tho like provision (section 7) of a 1 per cent, per annum sinking fund. Upwards of £300,000 was raised on debentures under this Ordinance. These three Provincial Ordinances have never been repealed. They are at this moment binding on the Provincial Government of Canterbury, and upon everyone else interested in their provisions. The Provincial Government have always faithfully fulfilled the obligations thereby imposed upon them, i.e., they have regularly paid, up to this date, all interest due upon their debentures, out of the revenues of the Province ; and from the same source they have provided the various sinking funds they were bound to set apart) I was appointed (honorary) English Agent for Canterbury in 1556 by Ordinance, Session 6, No. 1, and confirmed in that office in 1861 by the third English Agent's Ordinance, Session 17, No. 1. I was appointed by the Superintendent one of the persons to whom the sinking funds respectively should be paid by the Province. They have been so paid to me accordingly from time to time, and I have now the custody and, with those who are associated with me, the control of the securities in which the amount —say £41,000 —is now invested. We regard ourselves as trustees, first, for the debenture-holders for whose benefit the money was paid to us, and, second, subject to those rights of the debenture-holders, for the Provincial Government who provided the money. I apprehend there could and can be no doubt that this was and still is an accurate description of our position, unless and until it shall have been varied by competent legislative or judicial authority. In order to make clear the objections to " The Public Debts Sinking Funds Act, 1865," it will next be necessary that I should call your Lordship's attention to various Acts of the New Zealand Legislature in 1867, chapters 84, 89, and 90, which must be read together. First, " The Public Bevenues Act, 1867," c. 84, s. 44, provides in substance that, after deducting inter alia all sums chargeable on account of so much of the interest and sinking fund of loans raised upon tho security of the general revenue of the Colony as shall have been made a charge against the revenues of any Province, the Colonial Treasurer shall forthwith pay over monthly out of the consolidated fund to the Provincial account of such Province the monthly balance appearing on such account to be due. No other deductions besides those specified are to be made. The relevancy of this remark I hope to show presently. 2. By " The Public Debts Act, 1867," c. 89, s. 2, it is provided that " The principal, interest, and " sinking fund payable upon all Provincial debentures already issued, or which may hereafter be issued, " in accordance with the provisions of this Act, under the authority of any of the Acts or Ordinances " of the Superintendent: and Provincial Council of any Province of the Colony specified in the Schedule " A. to this Act shall from and after the passing of this Act be charged upon and paid out of the " consolidated revenue of the Colony of New Zealand," &c. How have the engagements thereby entered into been hitherto fulfilled ? The Act passed 10th October, 1867. The statutory obligation on the General Government of New Zealand to pay sinking fund and interest on the Provincial loans commenced from that date. Not one shilling of interest or sinking fund on the outstanding debentures of Canterbury has ever been paid by the General Government out of the consolidated revenue of New Zealand. In June last I asked Mr. Fitzherbert, the author of the Act and the special agent in England for giving effect to its provisions, whether he would pay the sinking fund and interest on the Provincial loans of Canterbury, then about to become due. His reply was that he had no instructions on the subject, and that he was not aware that the Governor of New Zealand had by proclamation (see the latter clause of the same section 2) fixed the time and place for such payment. If that clause be directory only and not obligatory, the liability of the Government of New Zealand to make the payments in question may be indefinitely postponed. I admit that the 3rd section of this same Public Debts Act contains a perfectly equitable provision—that all sums of money thereafter paid by the Colonial Treasurer for interest and sinking fund on Provincial loans shall be charged against the Province in respect of which such payment shall have been made. It can make no difference whether the payment bo made by the Colony and subsequently charged by the Colony against the Province, or made by the Province direct in tho first instance. It is fair to add that the General Government professes its intention to pay the interest and sinking fund due on Provincial loans for the six months ending 30th June, 1869. But, as a matter of fact, which I trust your Lordship will see immediately is important, the Province has paid to me as trustee of these sinking funds, since October, 1867, no less than £15,890 10s.—portion of the £41,000 before mentioned —besides interest upwards of £19,000. 3. " The Consolidated Loan Act, 1567," c. 90, section 3, empowers an agent or agents appointed by the Governor to borrow the sum of £7,000,000, and section 7 enacts that " all moneys borrowed " under the authority of this Act shall be applied towards the conversion, redemption, and payment " of the loans of the Government of New Zealand issued under Acts of the General Assembly, and " of the several loans of the Provincial Governments of the several Provinces of New Zealand specified " in ' The Public Debts Act, 1867,' and to no other purposes." Now your Lordship will find that in no one of these three Acts of 1867 is there any reference whatever to accrued sinking funds. The Colony obtained the sanction of the Crown to a loan of £7,000,000 sterling on the representation embodied in these Acts, that £2,359,000 of it, at least, was required and should be applied to the redemption and payment of the full amount of Provincial loans specified in " The Public Debts Act, 1867," without any deduction whatever in respect of accrued sinking funds or otherwise. I do not impute to those who framed the Acts of 1867 that, at the time those Acts were passed, they intended afterwards to lay claim to the accrued sinking funds of the Provincial loans ; but whether intentional or accidental, the omission of any reference whatever to these funds, and the further omission to mention that £50,000 of the Christchurch Eailway Loan had been cancelled, had the practical result of giving the Government of New Zealand power to raise a larger sum than was required for the purposes to which the moneys borrowed were to be exclusively applied. Mr. Fitzherbert, the Colonial Treasurer, came to England directly after these Acts of 1867 were