THE SACREDNESS OF CONTRACT

Otago Witness, Issue 2719, 25 April 1906, Page 17

THE SACREDNESS OF CONTRACT

THE ALEXANDRA BONANZA WATER SUPPLY. HISTORY OF THE NEGOTIATIONS WITH THE GOVERNMENT. At a meeting of shareholders o£ the Alexandra Bonanza Geld Dredging and Sluicing Company, 'held on Wednesday, ifc was decided — "That the most important of the correspondence between the company and the Government relating to the purchase of the claim should be printed' and issued to shareholders." As the history of the negotiations, as set out in the correspondence, is of interest to others as well as shareholders, we give below what we believe to be an accurate- outline of the course of the negotiations. Ifc appears that the Government , approached the company in February, 1905, by letter to ascertain whether the company was prepared to sell its water rights and claim to the Government. . Apparently thi%, was in pursuance of the intention expressed by, .the Government and"" by the Premier to provide for' irrigation in Central Otago. The company replied that it was not desirous of selling. Subsequently the company wrote to the Government stating that it was prepared to sell for £20.000. The Government then sent down Mr Hayes (the chief -inspector of mines), who made a hurried, though careful, inspection in stormy weather, and reported th© value of the property to be, in his opinion, about £12,000. Shortly after an offer of £10,000 reached the company from Blacks, but this was declined. The matter then dropped. The company's solicitors, being ignorant of these negotiations, wrote to the company on May 23 stating that they thought it was a favourable opportunity to sell the company's property. They were authorised to do so for £18,000, to include everything Correspondence ensued with the Government, who, after endeavouring to get behind the agents and deal direct with tho company, wrote to the company asking for particulars of tho property. These particulars were supplied on July 19 by the company's /Solicitors, as agents. Further correspondence ensued, and on August 15 the Government stated its intention to obtain a report. The directors being desirous of having all the features pointed out to the inspector, the Government was asked to state when that official would lisit the property, and it replied that he would do so early in September. Subsequently the Under-secretary wired to the company's solicitors stating that Mr H. A. Gordon was leaving Wellington on Septembor 6 to inspect, and would call on them. Mr A. J. Park accompanied Mr Gordon, who made the inspection, which occupied a wf>ek, being concluded by September 21. Mr Gordon's attention was particularly drawn to the plant and claim, but he declined to look afc them, stalling that whatever he recommended the Government to do, he certainly would not recommend it to purchase the claim or plant. The Government then made aji offer to the solicitors cf the company in the following letter, dated November 1, from Mr H. J. H. Elliott, Und<»r-«ecreta.ry for Mine* : —

Gentlemen —Referring to previous correspondence with respect to the purchase by the Government of the mining pnvileges owned by tho Alexandra. Bonanza Gold D.-edging and Sluicing Company (Ltd.), I am now directed by the Hon. Minister of Mines to offer, withou: prejudice, the sum of £13,050 for tho undermentioned privileges — namely, dam at Greenland Swamp, main race, flume, bridges, dam at head o f Wat Gully, right of Blackwell's race, right cf Ida Valley races, and tailraces, and on execution of transfers or these privileges to h ; s Majesty the King, to the satisfaction of the Crown Solicitor at Dunedin (Mr J. F. M. Fiater), -the rain offered will be paid. You will note that the purchase of tho special claim and hydraulic plant is not included in this offer.

This was immediately sent to the directors, who met and decidpd to accept the offer. Thereupon the solicitors (Messrs Park and Basleyl sent tho following unconditional acceptance to the Under-secretary: —

Alexandra Bonanza G.ild Dredging and Sluicing Company (L/td.) — Su. — We are in receipt of your letter of the Ist inst., -as per margin, relating to this properly, and in reply we are instructed to accept the offer therein contained.

The secretary of the company then wrore under date 6th November, confirming the sale and asking upon what terms the Government would allow the company water to work its claim. The Crown Solicitor was supplied with full particulars on the 10th November. A meeting at Alexandra on the 10th November passed a resolution unanimously expressing appreciation at the purchase, and Mr Bennefc referred to the purchase in his speech at Ctyde on No\ ember 11 with approval. A disturbing element at

this stage appears to have made its power visible, for the following letter, indicative of a desire to" shuffle, was received from the Undersecretary of the Mines Department, dated November 14: — .j' Gentlemen,— ln reply to. your letter, of the, 3rd inst., accepting the offei -in my letter of the Ist for the purchase from the Alexandra Bonanza Gold Dredging and Sluicing Company of the mining privileges enumerated therein, I am directed to inform. 'you tha.t further consideration of the tihe matter is held over for the present.

The following letter was also sent by the Under-secretary to the ~ secretary of the company, dated Noveniber 15: —

Sir,— l have to acknowledge the receipt of your letter of the 6th insfc. inquiring the rates at whioh -the Government will be prepared lo supply water for the working of the Alexandra Bonanza Gold Dredging' and Sluicing Company's special claim in the "event of the purchase by the Government of that company's waiter rights. In reply, I am directed to inform you that further consideration of the purchase cf the water rigbt3 referred to is held over for the- present.

The Crown Solicitor was notified on the 1 22nd November and 27thl.Noveinber \o com- ) p,lete the transfer. He was interviewed, ,and stated that he didjiot know what was , the matter, as *.he had,* only had one'- com- ' municatiou. from Wellington.'- Ther fbllow- : ing." further letter, dated jSovetnber. 28, -was i received from the Government, through the '■ .TJnder-secretary, terminating "negotia-' 'tions" :—: — ' -"- Gentlemen, — Referring to my letter of the 14th inst., No. 2239. I am now dire-oted to inform you that the offer to purchase the mining privileges owned by -the Alexandra Bonanza ; Gold Dredging and Sluicing Company (Ltd.;, i eimmersited in letter J\'o. 2114 of the Ist inst., ' is withdrawn, and further negotiations for the purchase of the properties are now at an end. The Crown Solicitor (Hr J. F. M. Fraser) also wrote as follows, under date November j 29, to the company's solicitors: — Dear Sirs. — Alexandra Bonanza. — I am in re- • ceipt of your letter of the 25th inst. herein. ] I am to-day an receipt of a letter from the department iufoiming me that you have been i notified that the offer is withdrawn and negotiations ended. The following letter was written to the Government by the company's solicitors on the Ist December : — Alexandra Bonanza Gold Dredging and Sluicing Company to H.M. the King. — Sir,— We are in receipt of your letters of the 14th aiid 2Sth November, and we shall be glad to know the reaaons why the Government now seek to repudiate the con-traot already made and contained in your letter of the Ist November and our reply of the 3rd November. On November 30, 1905, the Premier arrived in Dunedi.n from Wellington, and a deputation, from the company waited upon him afc night lo get some explanation Of the reason for the letter of withdrawal having been =ent. The deputation, which consisted of Mc&srs G. la. Denniston, A. J. Park, J. Davie, and William Brown, found the Crown Prosecutor having a long interview with th-p Premier. Afterwards they v>ero admitted to his presence, and were told that — (1) He was quite unaware of the i-easons why that letter had been sent; (2) he surmised something had intervened between the dates of the acceptance and the withdrawal ; (3) that, the difference of share quotations since the offer had been made showed that the shareholders had been offered a large sum in excess of value ; (4) that the company could not bind the Crown ; (5) that he understood that the parliamentary xot& was intended to cover the purchase of the claim and plant, as well as the water rights, which was possibly tho reason for the letter from the Mines Department; (6) that the policy to purchase had not been abandoned ; (7) that he would suggest that the letter should be altered, so as to read that " negotiations were suspended " : and (8) lastly, that he would instruct that all the papers should bo referred to the Crown Prosecutor, Dunedin. The Premier wrote, under date December 4, to the chairman of directors, as follows : Dear Sir, — I have to acknowledge the receipt of your letter of the 2nd inst. When at Lawrence on Friday last I informed Mr Denniston, as I informed the deputation, that the correspondence m respect to the purchase of the Alexandra Bonanza water rights would be referred to the Crown Solicitor, Dunedin. On Saturday afternoon I conferred with him on the subject, and as a result of thai conference I have communicated ■with the Hon. the Minister for Mines, and have suggested that in lieu of withdrawing from negotiations the company .should be informed that, the negotiations are suspended pending inquiry. I have suggested to the Minister for Manes that he .should communioa.te at once with the Crown Solicitor, who I believe has advised the department on the lines that I (have suggested. When the deputation waited upon me in reference -to this matter on Thursday evening la-it, I asked that copies of correspondence be forwarded to the Crown Solicitor (Mr J. F. M. Fraser). I also concurred in your seeing him upon the subject. I presume this Iwa been acted ujpoji.

On the same date Mr .W. Brown, chair^ man of directors, sent tho" following replyto the Premier : — Sir, — Re Alexandra, Bonanza Company. — I / am in receipt oi your letter of «veu date. The directors have made repeated attempts " to interview Mr Fraser since we were referred" to him, both on Saturday and to-day, but have not succeeded in seeing 'him. Permit me to say that the position is not a matter of " negotiations- " with the Government, but' that it has been closed, and a 'definite contract entered into. As the Government fails to realise its obligations 'under the contract made with the company, it appears to the board that it is useless prolonging this correspondence and as they 'feel , very . strongly, that their first duty is. to * their shareholders, who axe as yet ignorant' of tne situation, the. board he,s no alternative but to immediately inform all the shareholders of the. whole pea:-" tion, regretting that this step is forced wnon us. At a subseqx:«nt interview vi,' ,ir.Joseph Ward (it appears from a n,u.. .. by '- the chairman) it transpired that theCabinefc ' had acted deliberately in view of subse- ' quent • "information, or which the Premier must have 'been well . aware. Moreover, nothing had/ intervened ' between the con- . tracting-^parties which- could •in any way - affect 'an- , absolute i "contract. >^Whatever quotations, .had- > been made' for -the ■ com-'.' pany's 6hare3, >s they'Cwero "unsupported by- " any transactions or transfers, but in, .any ' case share' Quotations noy bearing jon. - the value of a^prbpeHy. ,*£Fho~ v financial, statement submitted to Parliament included - a vote of £13,000 for the purchase of the- , company's " water rights " only, without >■ mention of claim or . plant. Over, 50 mil- < lions of money is due in London on the % assumption that the Crown is bound, by.its ; contracts, and^ lastly, the Premier's promiso to refer all the documents to - the-. Crown Prosecutor in Dunedin was never fulfilled. On December 12, 1905, Sir Joseph Ward arrived in Dunedin, and another deputation, consisting of the same gentlemen who had interviewed tho Premier, waited upon, him. Sir Joseph Ward admitted that a, contract had been cmtered into, but informed the deputation that the Cabinet had acted as it did because of a communication whioh had been received from Dunedin containing certain allegations which. must be inquired into. He would not disclose their nature becauss they had been, communicated confidentially, but if they were true he did not care if the matter of " the Government's action in respect cif the contract were published to the whole world.

-- No further information could be obtained from Sir Joseph Ward, but, meagre as it - '-was, it completely contradicted all the -Premier's laboured allegations. On March 12, 1906, the Hon. W. M'Gowan, Minister of Mines, being in Dunedin, the chairman oi the company obtained an interview with him, and repre- - Benfced the extraordinary action of the ' Government in repudiating a contract " entered into after two separate inspections and reports by two engineers chosen by the Government, and -urged that a settlement -_fee made without further delay under that contract. Mr M'Gowan replied that that - contract was suspended, and he would not - eettle under it, but that he had sent another offer, and the company must dea-l with it by- accepting it or, if it pleased, ~-j: declining it and taking what other course ,it thought fit. The Minister was reminded that- the company did not regard the -" contract -us suspended, but in full foree — . that -it took two parties to suspend or cancel a contract, and that refusal to settle ,«nder a contract was a- breach of faith," "and, ***.in vshort; repudiation; 'but he replied in "*'* effect that', the company might -take the 1 offer- last made or leave, it. Mr M'Grcrwan then BhowjX'-~a r newspaper report of a \_ "o& Lak*e • Ellesmere settlers to-sjtlie-^Premier'Cn June -last, in -^hieh -the" -CPrcmier had replied-;' u He could tell them ' Ith'isjmuehr^fchafc a contract once^-made with - so far -as" he' was " : } concerned.- ? Don't you lose any , 'sleep over - jth'e matter," 'he'added^ "Mr M'Gowan re- | marked that " that was only a newspaper i^epbrt," " and the interview closed. The directors liad therefore to consider whether j*hey, should proceed to take legal proceedings to obtain the benefit of the contract. -After, full consideration they were advised ; .that they shou'd not report to force, no •matter how indignant they might feel, and ,that the Government should be pressed to - carry out its contract. Ultimately the Government sent down two engineers, who made a careful examination, inspecting the share transactions (which were only two ;" or three hundred), and finally, apparently, confirmed Mr Gordon's report. Thereupon " _<fche Government made an offer of £13,000 for the property including the plant. This offer was submitted to shareholders at a ! .very stormy meeting. Owing to the action 'of- the Government it was feared that it /" might; at any time rfip/udiata its second and in order to give no ground of its conduct was borne in silence, -!no confidence being felt until the cash was - received that it would not go back on its second written offer. It was considered that it 6hould be accepted owinij to the delay of , " litigation and the necessity of reworking and using the race to keep it from for- - feiture. which would have involved a great deal of expense, as the Dlant had been - dismantled. However, the money has been paid, but the shareholders have been deprived of Is 6d ppr share by conduct which, "if a private individual had attempted " it, would have resulted in the receipt of :_ a writ within 2* Hours/ Such is the power ■%i Government. .