13

D.—2

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