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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.